DEC
4

Moral Hazard

 

Moral hazard is everywhere; financial institutions take risks assuming that they will be bailed out when the bell rings.   The  Enron event, the subprime crisis, and the events in Europe as 2011 comes to an end are current manifestations. Countries of South Europe assumed that the EU would come to their rescue when necessary.  Lack of  governance mechanisms globally and in Europe made the emergence of a crisis possible.