{"id":4287,"date":"2008-09-08T15:39:28","date_gmt":"2008-09-08T22:39:28","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=4287"},"modified":"2008-09-08T15:50:39","modified_gmt":"2008-09-08T22:50:39","slug":"moral-hazard-revisited","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/4287\/moral-hazard-revisited\/","title":{"rendered":"Moral Hazard Revisited….."},"content":{"rendered":"

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 them private again?”<\/p>\n

In light of that, I thought I’d repost what I original wrote on July 22, 2008 about a potential bailout.\u00a0\u00a0 Not because I think I was right, but because I think we need to start thinking and talking about what happens now.\u00a0\u00a0 I certainly don’t want the Federal government “mucking around” in the mortgage world for a long time.<\/p>\n

What do you think?<\/p>\n

Tom Vanderwell<\/p>\n

July 22, 2008\u00a0 Barry Ritholz at The Big Picture<\/a> had these two comics that brought to the forefront again the issue of moral hazard.\u00a0\u00a0 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.\u00a0 Will Fannie or Freddie buy it?\u00a0\u00a0 That’s all that most mortgage lenders really cared about when structuring a loan.\u00a0\u00a0 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 Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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 them private again?” In light […]<\/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":[26],"tags":[],"class_list":{"0":"post-4287","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-lending","8":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":3447,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/3447\/moral-hazard\/","url_meta":{"origin":4287,"position":0},"title":"Moral Hazard….","author":"Tom Vanderwell","date":"July 22, 2008","format":false,"excerpt":"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\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"This is going to get expensive.....","src":"https:\/\/i0.wp.com\/straighttalkaboutmortgages.wordpress.com\/files\/2008\/07\/moral-hazard.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":16864,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/16864\/how-do-you-buy-votes-moral-hazard\/","url_meta":{"origin":4287,"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":4287,"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":4287,"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":9794,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/9794\/eliminate-the-government-option-for-a-healthy-mortgage-industry\/","url_meta":{"origin":4287,"position":4},"title":"Eliminate the Government Option For a Healthy Mortgage Industry","author":"Brian Brady","date":"September 19, 2009","format":false,"excerpt":"Most loan originators are grateful for the \"government option\" in the mortgage markets because of the liquidity crunch. I submit that the reason for the mortgage liquidity crunch was TOO much government involvement in housing and its increased involvement has ruined mortgage banking. That's going to be a hard concept\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":11904,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/11904\/how-an-activist-government-destroys-the-environment\/","url_meta":{"origin":4287,"position":5},"title":"How An Activist Government Destroys the Environment","author":"Brian Brady","date":"May 4, 2010","format":false,"excerpt":"Sarah Palin is so suspiciously quiet this week as is President Obama.\u00a0 We're all kind of holding our breath, as the oil spreads throughout the Gulf of Mexico, with hopes and prayers that it doesn't reach the Panhandle beaches.\u00a0 This oil spill is big and its effects might be catastrophic.\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":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/4287","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=4287"}],"version-history":[{"count":2,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/4287\/revisions"}],"predecessor-version":[{"id":4289,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/4287\/revisions\/4289"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=4287"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=4287"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=4287"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}