Great article in the Washington Post about moral hazard on the anniversary of the collapse of Lehman Brothers. Basically, the government said it wouldn’t back up Lehman and when it didn’t, the collateral damage to the economy was so massive that the government came back, begging for forgiveness, and promise no more Lehmans.
The result? Banks could get riskier than ever. Read the article and more about what moral hazard is on the ol’ Wikipedia, and then suggest what you think the government should do. If it lets banks fail, we could have massive and deep recessions. If it doesn’t, then they’ll carry on with the bubble party because they know there’s a sugar daddy waiting to give them a bailout, no matter what.