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
- 6 Things I Learned From "The Map and the Territory"
- 41 Things I've Learned in the Past 10 Years
- The Silver Lining of HSAs
- Fannie Mae And Freddie Mac's Shareholders Might Not See Any Profits After All
- Medicare: Spending Crisis Averted or Disaster Looming?
- Social Security: The Shocking Way the Government's Taking Benefits Away