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Following that line of reasoning, isn't a bank incentivised to accrue as much debt as possible because the fed will just bail them out if they can't pay it back
by Cakez0r 7y ago
Following that line of reasoning, isn't a bank incentivised to accrue as much debt as possible because the fed will just bail them out if they can't pay it back?
- sedeki 7y agoTaken to the extreme, yes. If enough banks do it, the reason for bailout is called "too big to fail".
- the_watcher 7y agoThat's the moral hazard, yes.