No doubt, any proposal of substance that would dramatically help middle-income and poor Americans will be met with the argument that is commonly called ?moral hazard,? from those mostly on the right who advocate what I now call ?laissez-unfair.?
Moral hazard means that those who made mistakes should pay for those mistakes and not be helped by government, and that if they are, it sends a signal that mistaken behaviour would be encouraged if continued.
This is a false flag, for two reasons that I present:
First, many of those who have been hurt in the current credit debacle were victims not of their mistakes, but predatory practices, or deceptive practices, which are now under criminal and civil investigations in multiple jurisdictions.
Also, many of those who are hurting suffered unexpected hardships such as outsourcing of their jobs, layoffs, or very hard medical emergencies, sometimes accompanied by inadequate insurance or attempts by their insurance companies to avoid making good on terms of their policies.
There is a second problem with moral hazard, from the ?laissez-unfair? advocates, which is this:
Major mistakes were made by Alan Greenspan at the Federal Reserve Board. Where is the moral hazard for Mr Greenspan reaping huge compensation from a company named Paulson and Co, which made billions of dollars of profits by betting on the side of more foreclosures and more defaults and the failure of the Greenspan policies?
Nothing illegal or wrong with Paulson?s bets that foreclosures and defaults would rise. He was right. That makes a market a market. But for
Mr Greenspan to profit millions of dollars, paid by a new boss that made billions of dollars betting that the Greenspan policies would harm our economy?now if anything is a moral hazard, it is this.
The now-fired CEOs of Merrill Lynch, Citicorp and Countrywide Financial (among others) made disastrous business decisions that caused and profited from these failures. Yet these CEOs, at the heart of complicity for creating this mess, were compensated and rewarded hundreds of millions of dollars of personal wealth to create the mess and then for being fired for creating the mess.
If it is moral hazard to help middle- and lower middle-income Americans who made mistakes, is it not an exponentially greater moral hazard, by a factor of many millions, to reward those at the highest level of corporate leadership who caused and made money from this failure?
This is a double standard, hypocrisy on a grand scale, and laissez-unfair at its purist..
The smirking chimp
smirkingchimp.com/
