kaal:claim:1806252-013

Because banks expect to be bailed out with taxpayer funds, they may have less incentive to monitor their hedge fund lending activities, even though hedge funds are not themselves counterparties in government bailouts.

Hedge funds are not counterparties in government bailouts, but if banks get bailed out, they may have less incentive to monitor their hedge fund lending activities or other hedge fund-related business.

Kaal, Hedge Fund Regulation Via Basel III (2011), V.1 Moral Hazard and Its Impact on Indirect Regulation via CCRM, p. 63
https://ssrn.com/abstract=1806252 · source PDF

Kaal, Hedge Fund Regulation Via Basel III (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1806252

• governments are presumed willing to bail out banks

mechanismsupport: arguedfailure: bailout-induced-monitoring-failurefamily: otherrisk-and-incentivessystemic-riskcompliance

• extended_by kaal:claim:3405660-002 Moral hazard in hedge fund lending persists even when the lender is fully informed, because high enforcement c...
• extended_by kaal:claim:2714974-028 Direct regulation of hedge fund leverage increases moral hazard costs, because lenders and counterparties rela...
• extended_by kaal:claim:1998455-001 Government bailouts of systemically important financial institutions create strong incentives for those instit...
• supported_by kaal:claim:2998097-004 Banks overexposed themselves to private investment fund lending, which allowed LTCM and similar funds to grow ...

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