Moral Hazard

http://knowledge.wharton.upenn.edu/article.cfm?articleid=2282

There is evidently a difference of opinion on the Wharton faculty...several key members believe that there was not enough "penalty" in the ww financial crisis (and/or the U.S. government response to it) to deter the kind of risk practices that caused all the problems in the first place (article attached). We still have some of the large institutions that were "too big to fail". Citi would probably be a good example.

As many of you know, Jeremy Siegel is considered the best finance professor on that faculty. His perspective on this debate is that the crisis has caused enough suffering among corporate executives, shareholders, and others to deter overly "hazardous" financial practices. He goes on to add that many of the financial products and practices that contributed to the crisis have passed from the scene: the subprime mortgage market has dried up; financial institutions have curtailed "binge investing" with borrowed money, etc. Rather, Siegel sees the main problem today as "insufficient risk taking." Money isn't there for good investments...

I strongly recommend the article as it is most interesting to see the differing opinions of the best finance professors in the world on the "Great Recession", its causes, and what's next.