Question

When the government bails out failing banks, it creates a moral hazard problem; but when the government bails out homeowners who are defaulting on their mortgages, there is no moral hazard problem.TrueFalse

Answer 1

False

Step-by-step explanation:

There is also moral hazard problem in mortgage lending. Moral hazard is when one party takes risk knowing that another party like the tax payer will bear the consequence. In this case there is moral hazard in both banks and mortgages