It’s really amazing the number of people that don’t seem to understand that. It would be like if a dairy farmer overloaded his truck, crashed it and died. The government steps in and makes sure everyone gets milk while they sell off the cows. Then people say “this creates a moral hazard for dairy farmers to overload their trucks without consequences!”. No, dude. He died.
This is incorrect. The correct analogy would be if I set the speed of my automated truck to 20mph over the speed limit causing me to earn 10% more income for 10 years. Then the truck crashes and burns and my neighbors pay for it.
I’d agree that’s what happens with the big rescue loans that save businesses. But, that’s not what’s happening here. There just such extreme hyperbole about how this removes all risk for banks.
I guess where I can meet you in the middle is that in this crash from excessive speed (not over the speed limit, but only because they lobbied to have the speed limit raised) the customers are getting taken care of, the business owner loses his business and his competitors have to pay for the cleanup.
I’m curious how the banks feel about this. I really don’t believe that doubt about the banking industry is in their favor, even if it could be a differentiator in theory. The amount they’ll pay is a tiny fraction compared to the market cap lost this week.
