The Moral Hazard of Bailouts

Question: Would a triage solution, where healthy banks were left alone and unhealthy ones put through FDIC resolutions, have better managed the bailout? (Arnold Kling, EconLog)

John Allison: I definitely think it would’ve been feasible and I definitely think it’d have been better off in the long term. It’s difficult to argue about whether we’d have been better off in the short term, I think that’s a complicated question. But in the long term, it’d be much better off. In my career, Citigroup has failed three times, been bailed out by the government three times, and every time, they’ve gotten bigger and worse. There is a tremendous moral hazard to the government constantly keeping poor run institutions in business and it prevents a natural market correction process. So we shouldn’t have been in the situation if we hadn’t had the Fed over spending the money supply and what happened with affordable housing through government policy, we wouldn’t have been in the shape we were in. But given the situation, a triage solution would have really been a better solution.

How can we prevent companies like Citigroup from being continually buoyed by government funds while growing worse with each bailout? John Allison explains the long-term benefits of the triage solution to industry failures.

Why “shooting the messenger” is a real condition, explain scientists

Harvard psychologists discover why we dislike the people who deliver bad news.

Getty Images
Surprising Science
  • A new study looked at why people tend to "shoot the messenger".
  • It's a fact that people don't like those who deliver them bad news.
  • The effect stems from our inherent need to make sense of bad or unpredictable situations.
Keep reading Show less

Philosopher Alan Watts on the meaning of life

He reminds us that meaning is wherever we choose to look.

Photo: Pictorial Parade/Getty Images
Personal Growth
  • Alan Watts suggests there is no ultimate meaning of life, but that "the quality of our state of mind" defines meaning for us.
  • This is in contradiction to the notion that an inner essence is waiting to be discovered.
  • Paying attention to everyday, mundane objects can become highly significant, filling life with meaning.
Keep reading Show less

How to detect life on Mars

If life exists on Mars, there's a good chance it's related to us, say researchers.

NASA/JPL/USGS
Surprising Science

When MIT research scientist Christopher Carr visited a green sand beach in Hawaii at the age of 9, he probably didn't think that he'd use the little olivine crystals beneath his feet to one day search for extraterrestrial life.

Keep reading Show less