In response to the financial crisis that began in 2007, the government began to bail out banks deemed "too big to fail." Critics of this action argued that this would create the prospect of future bailouts and encourage banks to be fiscally irresponsible in the future.This illustrates

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The moral hazard problem occurs when entities take on excessive risks because they believe they will be protected from negative consequences, such as future bailouts.

In Response to the Financial Crisis That Began in 2007