The moral hazard problem caused by government safety nets:
A) is greater for larger banks.
B) is greater for smaller banks.
C) is pretty constant across banks of all sizes.
D) only exists for banks with high leverage ratios.

Question

Quizplus · Accepted Answer

The moral hazard problem caused by government safety nets is greater for larger banks because they are often considered "too big to fail," leading to riskier behavior under the assumption that they will be bailed out in case of failure.

The Moral Hazard Problem Caused by Government Safety Nets