Moral Hazard

The "conservatives" like to bleat about "moral hazard" as a reason to let GM and other companies fail. The thinking is that companies will not learn their lessons unless some of them fail as a result of their mismanagement.

There may be something to that. But we are not getting there with the bank bailouts. If anything, the message the banks are receiving is that if they are large enough, it doesn't matter what they do, Uncle Sam will be there to prevent them from failing. Yet we can't let the economy collapse and shatter just to teach the banks a lesson.

So what can be done? I don't know, as passing new laws doesn't reach the bad actors who brought about this mess.

Maybe we really do need to bring back the guillotine.