Moral Hazard

Tyler Durden's picture

2011 Greatest Hits: Presenting The Most Popular Posts Of The Past Year





Continuing our tradition of listing what according to Zero Hedge readers were the key news events of the year for the third year in a row (2009 and 2010 can be found here and here), we present, as is now customary, the most popular posts of the year as determined by the number of page views, or said otherwise - by the readers themselves. So without further ado, here are this year's top 20.

 
Tyler Durden's picture

The Global Moral Hazard Dawns: Merkel Says "It Must Be Prevented That Others Come Seeking A Haircut" As Ireland Cuts GDP Forecast





Just about 48 hours after it was duly noted as the greatest threat to the Eurozone in the post bailout world, Germany finally grasps the enormity of what global moral hazard truly means. As we said before, the biggest risk facing Europe, and by that we mean undercapitlized French banks (all of them) obviously, is not Greece or what haircut is applied to the meaningless €100 billion in Greek debt when all the exclusions are accounted for. It is what happens when everyone else understands they now have a carte blanche to pull a Greece at will. And while until now we had some glimmer of hope there was a behind the scenes agreement for this glaringly obvious deterioration to not manifest itself, Merkel just opened her mouth and proved our worst fears wrong. As Reuters reports, "Chancellor Angela Merkel said on Friday it was important to prevent others from seeking debt reductions after European Union leaders struck a deal with private banks to accept a nominal 50 percent cut on their Greek government debt holdings. "In Europe it must be prevented that others come seeking a haircut," she said." Too late, Angie, far, far too late. Because, just as expected, here comes Ireland and literally a few hours ago, launched the first warning shot that will imminently lead to what will be demands to pari passu treatment with Greece. Next up: Portugal, Spain, and, of course, Italy, which however won't be faking its own economic slow down.

 
Tyler Durden's picture

Fed's Fisher Comes Clean On Moral Hazard and 'Twist' Ineffectiveness





While Fed's Lockhart earlier opined on his 'hope' that rates will drop under 'Twist' (and we remind him that all but the 30Y are now higher in yield than before Twist was announced) but expects its impact to be modest, Fed's Fisher just lost-the-plot with his truthful explanation on why he dissented. Speaking in Dallas, Bloomberg reports some rather refreshingly honest headlines from the outspoken Fed President:

*FISHER SAYS FED POLICY `HAS YET TO SHOW EVIDENCE OF WORKING'

*FISHER SAYS BENEFITS OF OPERATION TWIST DON’T OUTWEIGH COSTS

*FISHER SAYS RECENT FOMC POLICIES LIKELY TO BE INEFFECTIVE

*FISHER SAYS FOMC POLICIES MAY WORK AGAINST JOB CREATION

*FISHER SAYS OPERATION TWIST WILL INCREASE INCENTIVES TO SAVE

 
Tyler Durden's picture

YouWalkAway.com: Bringing Moral Hazard To A Deadbeat Near You





Tonight's feel-good story of our time is a desperate stroll through the reality of the US housing market for millions of individuals (as opposed to the hope-driven must-say-something-positive spin the home-builder CEOs have been spewing recently). Notices-of-default jumped 33% in August, a nine-month high and largest month-over-month increase since August 2007 and it is becoming increasingly acceptable to walk away from contractual agreements as strategic default becomes the New American Dream.

 
Tyler Durden's picture

Forget The Twist, Here Comes Operation Torque: Presenting Morgan Stanley's Complete Moral Hazard Profit Guide





While we often pick on Morgan Stanley's Jim Caron (the same guy who year after year after year keeps predicting the yield on the 10 year will soar, and not just soar, but soar for all the wrong reasons, such as bull steepening and what not), has just diametrically changed his tune, by bringing us, drumroll please, Operation Torque. To wit: "Policy makers in both the US and Europe get back to work in September, and this month will be rife with deliberations on stimulus and market support policies. In our view, a duration extension to the Fed's SOMA portfolio is an optimal policy tool to engender easing. This can initially be done through extending the duration of reinvestments from MBS and agency holdings but may ultimately culminate in selling shorter-duration USTs in its SOMA portfolio in exchange for buying longer duration assets (‘Operation Torque’, as we at Morgan Stanley have dubbed it)." Why 2 Years? Because as per the August 9 FOMC statement, we know that there will no rate hike for the next 2 Years, and hence no duration risk. Which means that the Fed can sell an infinite amount of paper into a mid-2013 horizon without worrying about demand destruction. And by doing so it will, as we have been predicting since May, expand the duration of its portfolio, in the process pushing investors into risky assets for the third time in as many years. But there is a twist...

 
Tyler Durden's picture

Charting The Latest Iteration Of Moral Hazard





Since this chart from the WSJ sums up petty much everything about the "efficient market hypothesis" or whatever it is those wacky Chicago PhD's call their multi-variable, self-similar, Lorenzian "strange attractor" equations that describe human irrationality to the dot, there is little need for commentary (those who wish to do so, can read more about it at "Fed Faces Old Foe as Hazard Returns")

 
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?

 
Syndicate content
Do NOT follow this link or you will be banned from the site!