failure family

moral hazard and bailout expectation

13 claims across 5 works.

• anticipated-bailout-risk-shift: The incentive effects of corporate governance controls may not operate in systemically important financial institutions, because managers and owners w
• risk-incentive-reinforcement: Switching to contingent capital financing may reinforce rather than reduce risk incentives, and whether the risk incentives generated by contingent ca
• Bail-out expectation removes the loss threat and skews risk incentives: Reliance on public bail-outs, unaccompanied by any threat that management, shareholders and creditors would share significant losses, created an asymm
• Bailout expectation suppresses creditor monitoring: Ordinary SIFI creditors have suboptimal incentives to monitor management because they implicitly expect that the government will provide bailout fundi
• bailout-cost-externalization: Government bailouts of systemically important financial institutions create strong incentives for those institutions to externalize the cost of their
• guarantee-induced-leverage: The implicit guarantees contained in a bailout multiply the incentives for systemically important financial institutions to increase leverage, because
• monitoring-neglect-through-reliance-on-design: If a market evolves in which contingent capital designs appear to provide sufficient protection against systemic risk and contagion, decision makers m
• moral-reasoning-crowd-out: Contingent capital rules could contribute to overriding the moral reasoning of decision makers, in which case contingent capital would actually increa
• governance-controls-ineffective-in-sifis: Regular corporate governance controls may not work in systemically important financial institutions, because those institutions are considered too big
• risk-incentive-reinforcement: Switching to contingent capital financing could reinforce rather than dampen risk incentives, and these distorted risk incentives are a drawback of co
• retroactive-charge-legitimizes-bailout: An outright retroactive charge for government subsidies or for actions taken by regulators could backfire, because it would legitimize the bailout and
• Regulatory crowding out of private monitoring: Direct regulation of hedge fund leverage increases moral hazard costs, because lenders and counterparties relax their own vigilance once they rely on
• Prescriptive regime destabilization: Any prescriptive regulatory regime for hedge funds risks leaving the financial system less stable rather than more stable, because counterparties rela