Confronting the Problem

Read the following and answer the question at very last. Do not use reference, use your own words. Thank you!
Ben Bernanke, former chairman of the Federal Reserve Board, made the following comment in a speech, a few years after the financial crisis:
“As we try to make the financial system safer, we must inevitably confront the problem of moral hazard.
The actions taken by central banks and other authorities to stabilize a panic in the short run can work against stability in the long run, if investors and firms infer from those actions that they will never bear the full consequences of excessive risk-taking.”
Much of regulators’ focus, in combating moral hazard, is to up the ante of the consequences or imposing limits on the potential for “excessive” risk-taking. Are they, in essence, conceding that pure capitalism is a failure?
































Sample Solution