what-is-the-moral-hazard-associated-with-government-bailouts-during-the-financia

Question

What is the moral hazard associated with government bailouts during the financial crisis?

Accepted Answer

Financial institutions may take on excessive risks, believing they will be bailed out.

Answer

Banks may refuse to lend money, fearing government intervention.

Answer

Homeowners may default on their mortgages, expecting government assistance.

Answer

Investors may avoid purchasing government bonds, fearing default.