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That's actually the strategy, yes. It sounds like it might be bad, but...it isn't? In practice, people don't want to take risks that are irresponsible, they wan

That's actually the strategy, yes. It sounds like it might be bad, but...it isn't? In practice, people don't want to take risks that are irresponsible, they want to make money. I'd also point out that it was not the riskiness of the assets that the government bailed out. It was the complexity of valuation that reduced the short term liquidity in those CDOs and other collateralized and securitized debt products. When they were actually unwound, it turns out the risk was lower than people thought it would be.

sumedh 5y ago
> In practice, people don't want to take risks that are irresponsible Yes that was the same argument used by Alan Greenspan when he said investment banks dont need regulation because they wont take risks that are irresponsible, yet Lehman and Bear Sterns and others imploded because they did not understand the risks. This is precisely why you should not socialize the losses, if they fail let them fail or else you regulate them so they they dont take excessive risks. > It was the complexity of valuation that reduced the short term liquidity It was so complex that the bankers themselves did not understand it.