Moral Hazard

Tyler Durden's picture

Warren Buffett's Wells Fargo Busted For Lying To People, Wristslapped With $85 Million Fine By The Emperor Of Moral Hazard Himself





Shocker: the bank of Warren Buffett, that paragon of virtue and decency, busted by the capo di tutti ZIRP capi itself for lying to grandma? Surely WFC investors, who don't have to deal with their investment either admitting or denying wrongdoing, can "suck it in" and we can get Charlie Munger to preach some more fire and brimstone morality about the evils of gold and the miracles of taxpayer bailouts.

 
Tyler Durden's picture

Guest Post: Inevitable Catastrophe - The Fruits Of Moral Hazard On A Global Scale





Identify the common characteristic of these three statements:

1. The Federal Reserve will never let the stock market decline, i.e. the "Bernanke put"

2. The Chinese government will never let property prices decline

3. The European Central Bank will never let Greece default

The answer of course is moral hazard: a person who is insulated from risk will have an insatiable appetite for risky bets because any gains will be theirs to keep but any losses will be covered by the central bank or government. The global financial authorities’ success in propping up assets (stocks in the U.S., real estate in China, banks in Europe, etc.) over the past three years has strengthened this asymmetric disregard for systemic risk into a dangerously quasi-religious faith that central banks and governments have essentially unlimited power to keep asset prices aloft via printing money, manipulation of markets and financialization of their economies.

 
George Washington's picture

Even Greenspan Admits that Moral Hazard and Fraud are the Main Problems





The Maestro speaks at Jekyll Island ...

 
Static Chaos's picture

Proof Media in Total Moral Hazard When Forbes Compares BP with Goldman





When a major mainstream media like Forbes compares BP with Goldman Sachs and recommends investors to buy Goldman stocks, you know the world is in total moral hazard and deserved to be doomed as Marc Faber always said.

 
Tyler Durden's picture

German FinMin Capitulates, Says PIIGS, Global Moral Hazard Win





From Reuters:

German Fin Min: Crisis Largely Over In Europe and Germany
German Fin Min: If Greek Budget Consolidation Succeeds, No Tax Money Will Be Lost
German Fin Min: Without Consolidation In Greece We Will Have Unforeseeable Market Consequences

German Fin Min: Failure With Greece Would Put Euro In Question
German Fin Min: Cannot Throw Greece Out Of Eurozone

It's over - the excess debt/GDP terrorists have won, and Moral Hazard is now a global phenomenon. There will be no more failures anywhere. In other words, all your stock profits will come straight from your taxes.

 
Tyler Durden's picture

And The Proverbial Moral Hazard Foot-Shooting Ensues: With Ink Not Dry On First Bail Out, Greece Already Demands Another €50 Billion





Here is what happens when you green light Moral Hazard - in less than two hours after the videoconference in which the EMU announced €30 billion in aid for Greece, a Greek senior official has already come up and said that they were only kidding about needing just €40 or so billion (with the IMF's 10). The full amount will actually be double that, or €80 billion, for the three year period. Look for Portugal, Spain, Ireland, Bulgaria, Hungary, Latvia, and Lithuania to come knocking in the next 45 minutes.

 
Leo Kolivakis's picture

Canada Moral Hazard Corporation?





All eyes on the Vancouver games but there is a post-Olympics winter chill headed our way, and you'll be surprised to find out that all is not peachy in good old boring Canada...

 
Tyler Durden's picture

More Info On Moral Hazard, Global Edition, Via FT Germany





Now that there is no more risk, anywhere, here are the preliminary thoughts on how kicking the can down the road has just taken on a whole new meaning, courtesy of the FT Deutschland. We are certain that citizens of Germany and France will be ecstatic to see their tax money used to first save Greece, then Spain, the Portugal, then Italy, then Lithuania, then Bulgaria, etc.

 
naufalsanaullah's picture

In defense of the TBTFs, or the true originators of moral hazard





Zero Hedge embraces contrarian analysis. But its readers tend to be exaggeratedly and stubbornly critical of any opinion contrarian to the "ZH consensus". One of the most fallacious application of this proclivity is the never-ending attacks on TBTF banks, and the blame put on them for causing the current financial mess. We disagree with this myopic train of thought. Although banks have their share of criminality to pursue and prosecute, is the main blame argument posed against them merely the age-old straw man fallacy manifest?

 
Tyler Durden's picture

Federal Reserve Moral Hazard Smoking Gun: In August 2008 Goldman Was Willing To Tear Up AIG Derivative Contracts, Offered To Take Haircut





As observant readers will recall, a week ago we pointed out a letter in which the New York Fed's Steven Manzari instructed AIG to stand down on all discussions with counterparties on "tearing up/unwinding CDS trades on the CDO portfolio." At the time we focused on the word "stand down" as an indication of the Fed's lead role in the process. At this point there is no doubt that the FRBNY, together with its law firm, Davis Polk, were in the pilot's seat during the entire AIG negotiation, and while Tim Geithner may not have been the responsible man for this, someone must have been - and for the record, our money is a double or nothing on recently promoted FRBNY Senior Vice President Sarah Dahlgren, who as of January 21st is in charge of the Fed's Special Investments [AIG] Management Group. We sure hope Sarah gets the chance to recall her memories beginning in the fateful month of September 2008 when she became the person in charge of the FRBNY's AIG relationship. But back to the letter - little did we know that our focus was on the right sentence... but on the wrong word. What should have struck us front and center, was Habayeb's admission that contract "tear downs" had been evaluated. This means that someone, aside from AIG, must have expressed an interest in a tear down, which if true would have dramatic consequences for the entire AIG debacle. Today, the WSJ presented the missing piece of the puzzle.

 
Tyler Durden's picture

Mike Pento Rages Against The Central Planning Committee And Moral Hazard





"[The Fed] is making the situation much, much worse and they actually caused the problem to begin with. They have the foolish belief that they can pick the right interest rate. The interest rate should be a function of the supply of savings versus the demand for money. If you have one person or twelve people on the FOMC deciding that interest rates should be 1% or 0% they distort the cost of money and they cause the demand for money to rise, they cause the amount of money in circulation to skyrocket, and then you get this rolling bubble economy. That has to stop, that's where we have to start...We have now inculcated firmly this bailout mentality in the country, and that also has to stop." - Michael Pento

 
Tyler Durden's picture

Simon Johnson: "We Now Have A Financial System That Is Completely Based On Moral Hazard"





"We now have a financial system that is completely based on moral hazard...Crazy things happen when you have financial system like that... The conventional wisdom is you can't have back to back major financial crises. I think we're going to push that, we're going to have a look and see whether that's true. The next 12 months could really be exciting... But we are setting ourselves up for an enormous catastrophe." - Simon Johnson

 
Reggie Middleton's picture

Has Moral Hazard Hit the FDIC???





You don't put out a fire with gasoline. You don't cure a hangover with vodka. You don't end a headache by banging your head against the wall. Apparently, at least in Washington, you do address a sick banking system by keeping more sick banks open. It's as if I'm in the Twilight Zone...

 
Tyler Durden's picture

No More Failures Ever As Moral Hazard Goes Global: Austria's Hypo Alpe Adria Nationalized





The only way to maintain the global ponzi bubble as insiders cash out in ever increasing droves has now become a wave of rolling bailouts not only in the US, but across the entire world. The latest little casualty that could: Austria's Hypo Group Alpe Adria, the country's fifth largest bank by assets, which was nationalilzed ealier in a €5.5 billion bailout package. But ignore that: Europe is long and strong, with no bank balance sheet assets writedowns, a flourishing export economy, a surging currency and unprecedented growth ahead of soon to be (non) bankrupt Eastern European and Baltic states. The sarcasm in the previous statement is certainly not lost on the Austrian National Bank which said that "the whole Austrian economy has been able to avert a massive threat at a critical moment in time." No further commentary needed. Ben Bernanke's Moral Hazard world tour soon coming to an insolvent bank near your cottage.

 
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