Creating moral hazards

President Obama has created a number of moral hazards by trying to bail
out Americans whose risky behavior got them into trouble.

An example of the moral hazard being created in Washington is the
attempt to relieve monthly mortgage payments of families in economic
distress whose mortgages are underwater. As a result of this program,
taxpayers who lived modestly, saved and did not overextend themselves
with excessive mortgage debt are being asked to subsidize their
profligate neighbors who bought bigger houses than they could afford.
 
The most egregious moral hazard has been created in the financial and business sector, where companies and banks that are “too big to fail” have been bailed out with taxpayer money. These institutions include GM, Chrysler, Citibank, Fannie Mae and Freddie Mac. Institutions that paid fat bonuses to executives and outrageous benefits to union workers were rescued by taxpayer money when they should have gone bankrupt. With an institution that is “too big to fail,” it is “heads, I win” with risky behavior; and “tails,” the taxpayer looses when risky behavior results in financial losses.

Armstrong Williams is on Sirius/XM Power 169, 7-8 p.m. and 4-5 a.m., Monday through Friday. Become a fan on Facebook at www.facebook.com/arightside, and follow him on Twitter at www.twitter.com/arightside.