TARP and other lender-of-last-resort programs implemented by the Fed in response to the ﬁnancial crisis of 2007-2008

Question

Quizplus · Accepted Answer

The TARP and other lender-of-last-resort programs implemented by the Fed during the financial crisis of 2007-2008 have been criticized for increasing the moral hazard problem by limiting losses from bad financial decisions. The concern is that this could encourage risky behavior in the future, as financial institutions believe that the government will bail them out if things go wrong. While these programs did provide financial support during a time of crisis, they may have also contributed to an environment of moral hazard.

TARP and Other Lender-Of-Last-Resort Programs Implemented by the Fed in Response