The tendency of bankers to take unwarranted risks in making loans because deposits were insured is an example of what is referred to as a
A)golf course hazard
B)weather hazard
C)moral hazard
D)hazard pay
E)duke of hazard

Question

Quizplus · Accepted Answer

Moral hazard refers to the situation where a person or entity takes excessive risks because they are protected from the consequences. In the case of banking, deposit insurance protected depositors from losing their money, which incentivized bankers to make riskier loans than they otherwise would because they were not exposed to the same level of risk as their customers.

The Tendency of Bankers to Take Unwarranted Risks in Making