I recently came across a piece on this topic, and the author pointed out that the "moral hazard" people like to invoke actually applies to the lenders, not debtors.
The idea is that lenders need to understand that if they loan money to high risk borrowers, who subsequently default, then they shouldn't expect to be bailed out. It's wrong to bail out the lenders, because they'll just go out and make more crappy loans.
The idea is that lenders need to understand that if they loan money to high risk borrowers, who subsequently default, then they shouldn't expect to be bailed out. It's wrong to bail out the lenders, because they'll just go out and make more crappy loans.
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