Good point HLS: The big banks that made the foolish loans off-loaded the pain onto the taxpayers with the help of policies such as bailouts. That’s why moral hazard seldom exists when both parties are private sector actors. Each has an incentive to discover trickery or sleazy behavior of the other party. It is when governments, reacting to populist and emotional appeals, get involved to “help the little guy” that we all get to pay for the moral hazard. Often the pain is spread in hidden ways and spread over so many that we aren’t aware of it.
