tag:blogger.com,1999:blog-31423696.post4068989554146403842..comments2023-07-22T04:34:16.874-07:00Comments on Mammon Among Friends: Moral HazardDr. Malcolm C. Harris, Sr.http://www.blogger.com/profile/17980830934198211026noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-31423696.post-64844276401789479552008-12-08T11:20:00.000-08:002008-12-08T11:20:00.000-08:00Moral hazard is a risky element in the business wo...Moral hazard is a risky element in the business world. I think you have to take risks to gain, but at what cost. It seems these are the gambles that many businesses take all the time. It does help with customer/sales rep relationship. I guess it would establish a trust between the two.TaDonne'https://www.blogger.com/profile/02531863298279874619noreply@blogger.comtag:blogger.com,1999:blog-31423696.post-15354632401236388012008-09-04T08:07:00.000-07:002008-09-04T08:07:00.000-07:00So what is the incentive for the investor to do "b...So what is the incentive for the investor to do "background checks" on the loaning bank? If the FDIC insures their investment and the bank is giving investors a better rate the average Billy Bankroll is not going to care. Yes if the bank closes it's gates and locks it's doors, the investor will have to wait until the FDIC gets their cash to them, but they did get a ton of cash for doing close to nothing.<BR/><BR/>So a CEO of a bank, let's call it "Grizzly Firm Bank," sees that his bank is in trouble. "We are going to raise our interest rates to intice bigger loans. This will inturn save our 'Grizzly Firm Bank.'" <BR/><BR/>However, this risk does not pay off for the CEO. What happens to the bank...the FED bails them out, repays the loans, and slaps "Grizzly Firm Bank" on the wrist. This wrist slap reverberates through the bank and the board wants head on the chopping block.<BR/>"The CEO is the man responsible for this. His head will be on a spike by the end of this!" <BR/><BR/>This sounds like it will end in bloodshed and tears for the CEO and it will. But the bloodshed will be in the form a a hefty severence and early retirement package and the tears will be tears of joy for evading possible jail time.<BR/><BR/>So, all is well that ends well.vansanthttps://www.blogger.com/profile/09810218316951526632noreply@blogger.com