{"id":3447,"date":"2008-07-22T17:51:33","date_gmt":"2008-07-23T00:51:33","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=3447"},"modified":"2008-07-22T17:51:33","modified_gmt":"2008-07-23T00:51:33","slug":"moral-hazard","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/3447\/moral-hazard\/","title":{"rendered":"Moral Hazard…."},"content":{"rendered":"

Barry Ritholz at The Big Picture<\/a> had these two comics that brought to the forefront again the issue of moral hazard. Check out the comics and then we’ll talk “on the other side.”<\/p>\n

\"This<\/a><\/p>\n

\"Carry<\/a><\/p>\n

Okay, now some thoughts about moral hazard:<\/p>\n

The definition of moral hazard (as taken from that scholarly journal, Wikipedia):<\/a><\/p>\n

Moral hazard<\/strong> is the prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk. Moral hazard arises because an individual or institution does not bear the full consequences of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to bear some responsibility for the consequences of those actions.<\/em><\/p>\n

Let’s break that down and look at it a little more closely in light of the current market environment:<\/p>\n

a party insulated from risk may behave differently…. <\/em>What that means is that, frankly, the people on Wall Street and the bankers on Main St. (including yours truly) might very well have done things differently over the last few years if we had been more fully exposed to the risk. Will Fannie or Freddie buy it? That’s all that most mortgage lenders really cared about when structuring a loan. On Wall Street, the guys (I’m using that term in a gender neutral sense, okay?) who packaged these loans up and sold them as securities didn’t really care how they performed, all they cared about was the great big fat commissions that they made. The rating agencies didn’t care about whether they really told the truth about these mortgage backed securities, all they cared about was getting the big fat commission checks.<\/p>\n

And so what do we have now? We have, between Wachovia and Washington Mutual, $10.1 billion in loan loss provisions in the last 12 hours. That’s for a period of 90 days folks. I was going to figure out the cost per day but my calculator doesn’t crunch numbers that big!<\/p>\n

Moral hazard arises because an individual or institution does not bear Read more<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Barry Ritholz at The Big Picture had these two comics that brought to the forefront again the issue of moral hazard. Check out the comics and then we’ll talk “on the other side.” Okay, now some thoughts about moral hazard: The definition of moral hazard (as taken from that scholarly journal, Wikipedia): Moral hazard is […]<\/p>\n","protected":false},"author":44,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,26,5],"tags":[],"class_list":{"0":"post-3447","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-investment","7":"category-lending","8":"category-real-estate","10":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":4287,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/4287\/moral-hazard-revisited\/","url_meta":{"origin":3447,"position":0},"title":"Moral Hazard Revisited…..","author":"Tom Vanderwell","date":"September 8, 2008","format":false,"excerpt":"One of the important things that Paulson said in the press conference yesterday was that we (the government) don't want Fannie and Freddie to stay public and that one of the things that the next administration and Congress has to figure out is \"How in the world do we take\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":16864,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/16864\/how-do-you-buy-votes-moral-hazard\/","url_meta":{"origin":3447,"position":1},"title":"How do you buy votes? Moral\u00a0hazard.","author":"Greg Swann","date":"September 2, 2020","format":false,"excerpt":"CNBC: Housing Wire: \u201cTrump administration bans most evictions through December, but there\u2019s a catch.\u201d Paperwork, too, but apparently no relief for the landlords, who, at a minimum, are to be kept waiting. What a tangled web! I hate eviction, I much prefer negotiated exits, but the means by which democracy\u2026","rel":"","context":"In "Group Therapy"","block_context":{"text":"Group Therapy","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/group-therapy\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":10397,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/10397\/its-beginning-to-look-a-lot-like-christmas\/","url_meta":{"origin":3447,"position":2},"title":"It’s Beginning to Look a Lot Like Christmas","author":"Tom Vanderwell","date":"November 24, 2009","format":false,"excerpt":"Oops, I mean More Riskless.Thanks to Jeff Brown for the tip.\u00a0\u00a0 Enjoy!","rel":"","context":"In "Dirty Laundry"","block_context":{"text":"Dirty Laundry","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/dirty-laundry\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":12045,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/12045\/free-market-solutions-to-government-grown-problems\/","url_meta":{"origin":3447,"position":3},"title":"Free Market Solutions To Government- Hatched Problems","author":"Brian Brady","date":"May 22, 2010","format":false,"excerpt":"Got oil in your water?\u00a0 How's that government supervised clean up working out for you?\u00a0 A few weeks ago, I said: This may be a hard pill for government groupies to swallow but the response to the Exxon Valdez oil spill (more government regulations and a limit on liability) is\u2026","rel":"","context":"In "Real Estate"","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":4678,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/4678\/mortgage-market-week-in-review-to-bail-or-not-to-bail\/","url_meta":{"origin":3447,"position":4},"title":"Mortgage Market Week in Review – to Bail or not to Bail?","author":"Tom Vanderwell","date":"September 26, 2008","format":false,"excerpt":"Yikes, every week it\u2019s getting more and more challenging to lay out for you what\u2019s going on in the markets.\u00a0\u00a0 Hopefully it will get easier, but I\u2019m not really sure that it will for a while.\u00a0 So what are we going to talk about this week?\u00a0\u00a0 This week it\u2019s about\u2026","rel":"","context":"In "Dirty Laundry"","block_context":{"text":"Dirty Laundry","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/dirty-laundry\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":314,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/314\/caesars-wife-on-the-witness-stand-the-moral-the-practical-the-marketable-and-the-defensible-approach-to-forbidding-dual-agency\/","url_meta":{"origin":3447,"position":5},"title":"Caesar’s wife on the witness stand: The moral, the practical, the marketable and the defensible approach to forbidding dual agency . . .","author":"Greg Swann","date":"September 10, 2006","format":false,"excerpt":"I had a great letter today from Bob Hunter of the Muljat Group about our policy forbidding dual agency. 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Our brokerage is a\u2026","rel":"","context":"In "Blogging"","block_context":{"text":"Blogging","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/blogging\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.bloodhoundrealty.com\/NoDualAgency.jpg?resize=350%2C200","width":350,"height":200},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/3447","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/44"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=3447"}],"version-history":[{"count":4,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/3447\/revisions"}],"predecessor-version":[{"id":3451,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/3447\/revisions\/3451"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=3447"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=3447"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=3447"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}