A "too big to fail" policy encourages excessive risk taking at large banks.

Name: A "too big to fail" policy encourages excessive risk taking at large banks.
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Question

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The "too big to fail" policy implies that the government will bail out large financial institutions if they are at risk of failing, which can lead to moral hazard where these institutions engage in riskier behavior under the assumption that they will be rescued if things go wrong.

A "Too Big to Fail" Policy Encourages Excessive Risk Taking