Moral hazard is the state in which individuals and corporations will take on increasing amounts of risk because they believe they will not face consequences for risky actions.
The concept of "moral hazard" has come to the forefront in 2008, given incidents like the Federal Reserve's orchestration of JP Morgan's purchase of Bear Stearns and the sub-prime lending crisis.
The concept of "moral hazard" comes into play when corporations are deemed "too big to fail" and bailouts occur.
Related Fool Articles
Related Community Blogs
Recent Mentions on Fool.com
- How Does Apollo Investment Corporation Make Money?
- 7 Books You Should Read This Summer
- Former FDIC Chair on How to Build a Better Financial System
- Facebook's Coming Mobile Payments Gambit
- 3 Reasons Bank of America Should Love the Fed?s Stress Tests
- Why Citigroup, Accenture, and Windstream Corporation Are Today?s 3 Worst Stocks