On the other hand.........when the loan originator knows he WILL suffer a consequence via government prosecution if he DOESN'T make the loan ...it removes any incentive for him to be judicious in assessing the borrower's ability to pay. That was exactly the situation under the Community Reinvestment Act.

At the same time, I agree that moral hazard, in the form of public bailouts, needs to be eliminated.

The big banks had no gaurantee when they were bundling loans that the Gov. would bale them out. And the small banks had few options to refuse those same loans.

As I understand it now, no more bail outs. Now its a bail in, close all banks & take 10-20-30% of every one $$$$ to make the banks solvent, like they did in Egypt & Greece.
Dennis

Why would you confiscate private assets from a healthy bank in order to prop up a failing institution that made bad decisions ?