Evaluate the accuracy of the following statement.
“The government’s response to the failures of Silicon Valley Bank and Signature Bank has created a moral hazard problem that might be dubbed “too rich to loose” “.
To adequately evaluate this statement, you will need to be clear on what is moral hazard (view my lecture on the Lemons Problem). In addition you will need to develop an understanding of how the government responded to the crisis and the implications of that response. I have attached links to three articles that should help you develop an understanding of these issues but as always you should consult whatever other sources help you understand the issues.
The Fed’s Response To Recent Bank Failures
Links to an external site.
How Does Deposit Insurance Work
Links to an external site.
Will SVB’s Collapse lead to a Financial Crisis?
Links to an external site.
Video Lecture on Lemons Problem
Links to an external site.
Requirements: 600 | .doc file