Moral hazard is a concept that shows that people who are sheltered from the consequences of foolhardy actions may be more likely to repeat them than people who feel the pain of their actions. In other words, if you spend too much of your money on beer, but your parents pay your other bills anyway, you are not as likely to change your behavior if your parents let you learn on your own.

This is another reason why the bailout bill was and is such a bad idea. Read this story. I really sympathize with this banker. ...in offices around the country, [good, trustworthy] bankers simmered. Peter Fitzgerald, chairman of Chain Bridge Bank in McLean, said he was "much chagrined that we will be punished for behaving prudently by now having to face reckless competitors who all of a sudden are subsidized by the federal government."

This bank did what they were supposed to do, properly managed their bank. In a capitalistic society, they would be rewarded by having opportunities to grow as their foolhardy peers went bankrupt. Instead, taxpayer money (that is even more money that we will have to pay in taxes) is being used to prop up the poorly managed banks so that they can complete with the well run banks. We are rewarding the wrong type of behavior and penalizing those who acted wisely.

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