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Moral hazard is fashionable
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    This past week I’ve had a little free time on my hands and, in an attempt to relax a bit, I spent some time flipping through the television stations.
    While watching various news programs, it struck me that all the news channels are practically the same — at least when it comes to straight news. As I flipped, it seemed like the same story was on every channel. (Much like it used to be during the President’s State of the Union address. The address on every channel except PBS, which would invariably show an “Algae of the World” documentary.)
    Before I talk more TV, let me preface by saying I rarely get my best information from television news. The majority I get through reading, typically by accessing news articles via the Internet. I read national and international newspapers and magazines, check out various commentary and lifestyle sites and have a couple links sites (a site that just lists links to articles on other sites) I visit regularly.
    And, of course, Dave Barry’s blog.
    So it was interesting to see so many of the same stories, presented in much the same way on so many different channels. It was especially interesting since there’s always so much talk about right-wing FOX and left-wing CNN/MSNBC.
    (Mind you I’m speaking specifically about the actual news shows, not punditry. FOX’s pundits definitely tilt right, while the cable pundits typically lean left. Not too many moderates at all.)
    This week, for instance, there’s been all kinds of coverage of Obama’s trip to the Middle East. I can honestly say, after watching about two hours of news programming, I have seen Obama from every different angle possible. The head-on shot, the left/right profile shot, the looking-up-from-the-ground shot, the I’m-talking-to-the-troops shot, the walking-away shot, the getting-in/getting-out-of-the-plane shot, the I’m-wearing-camouflage shot, the close-up — you get my drift.
    I’m still not sure why he’s there though.
    Back to the original point, the news — regardless of the channel — has been pretty much the same — all of it not only straight-forward, but, frankly, simplistically presented. In fact, it seemed Headline News gave about as much information and insight as any of the “traditional” network or cable news stations
    But that’s the ultimate failing in TV news — there simply isn’t enough time (or attention span by the audience) to delve in-depth into any particular topic. If modern campaigning has become nothing more than politics of the sound bite, then modern news has become nothing more than drive-by reporting — short, easy to repeat, absolutely no substance.
    Switching gears, I also watched a few of the afternoon financial shows, many of which were discussing the potential mortgage bailout by Congress. I was amazed to hear quite a few talking heads discussing the moral hazard inherent in a bailout.
    For those unaware of the term, Wikipedia states that "moral hazard 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."  (I looked at a number of sources, but found Wikipedia's definition the most clear, concise and broadly applicable.)
    The reason I find unusual the mention of moral hazard by the pundits is that they summarily dismissed the idea of moral hazard while the Federal Reserve was lowering interest rates, which caused much of this financial mess in the first place. Lowering interest rates made it easier for people with shaky credit or flaky business plans to get their hands on capital.
    Don’t get me wrong. If the pundits can chant “moral hazard, moral hazard” and stop the bailout — that would be great. This is because people who took out adjustable mortgages, interest-only mortgages or no-documentation mortgages so they could get more house than they could traditionally afford or purchase investment property, should not be bailed out, neither should the investments bankers that bundled these mortgages together. In any economic climate, these types of loans are risky, so we should not reward stupid behavior.
    Now, if individual banks or mortgage companies want to restructure the loan of their clients so that said client won’t default. Terrific! What a great way to serve your customer while preserving the asset base of your institution. But to force the government (meaning the taxpayer) to foot the bill for dumb business decisions is just another dumb economic decision. After all, how do people learn from their mistakes if they aren’t allowed to suffer the consequences of their mistakes?
    It’s time to stop using the government to save failing businesses or terrible business practices. After all, the mortgage bailout could cost billions?  Don’t we have a school, a national park or a bridge that could better use that money?
    I know we do.

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