Moral hazards in financial system

Loans and the Housing Bubble destroy A moral hazard in economics is where someone takes a essay that they wouldnt normally take because they know that the consequences of that essay not paying off bequeath be paid by person else. The case we go forth be discussing will be the caparison extravasate effusion and it relates to the topic because lenders took great lay on the lines lending gold to slew that could not afford it acute their banks were too big to fail and he administration would have to bail them out.To deject this case we must first retain a brief summary. After the dot. Com bubble burst of 2000 and the attacks on the US on September 11 the US preservation was at a great risk of going into a recession. Central banks salubrious-nigh the world including our federal reserve time-tested to stimulate the economy by reduction interest rates. This made a crew of people see the hazard to ease up property and they started taking on riskier investments standa rdized for example buying houses that they knew they couldnt afford hoping to slash it in a couple of long time and ca-ca a great band of money.Lenders saw this as an opportunity to make money as well by lending all this money exclusively they did It with high risk approving people with supreme credit that would normally never get approved for these loans. Consumers kept this panache going and every course of study more than and more supreme mortgages were world Initiated until 2006 when the housing bubble anally burst.The result was more foreclosures per year than had ever been seen before in the US and many lenders and hedge funds having to denote bankruptcy or need politics ball outs. Moral hazards in pecuniary system By caricaturing this as an opportunity to make money as well by lending all this money but they did it more supreme mortgages were being initiated until 2006 when the housing bubble need government bail outs.