206k views
3 votes
When the government bails out failing banks, it creates a moral hazard problem; but when the government bails out homeowners who are defaulting on their mortgages, there is no moral hazard problem.TrueFalse

User Leo Lin
by
8.9k points

1 Answer

4 votes

Answer:

False

Step-by-step explanation:

There is also moral hazard problem in mortgage lending. Moral hazard is when one party takes risk knowing that another party like the tax payer will bear the consequence. In this case there is moral hazard in both banks and mortgages

User Lynel Hudson
by
8.6k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories