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More Moral Hazard?

President Obama said he would announce his plans to attack home foreclosure today just before signing the stimulus bill yesterday.  No matter what the plan is, it will undoubtedly shift incentives for homeowners or lenders.  Moral hazard is a term used in economics, business, and political science to describe a situation where one party is insulated from risk and that insulation changes their behavior so they behave as if they were not at risk.  Moral hazard comes up when an actor is not fully responsible for their actions—which could result in irresponsible behavior.

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Blog

More Moral Hazard?

President Obama said he would announce his plans to attack home foreclosure today just before signing the stimulus bill yesterday.  No matter what the plan is, it will undoubtedly shift incentives for homeowners or lenders.  Moral hazard is a term used in economics, business, and political science to describe a situation where one party is insulated from risk and that insulation changes their behavior so they behave as if they were not at risk.  Moral hazard comes up when an actor is not fully responsible for their actions—which could result in irresponsible behavior.

02/18/2009
Credit Where It's Due?

Looks like the Dodd credit card bill is poised to move its way through the hallowed halls of Congress. Given the topsy-turvy mortgage market, anything remotely related to the credit industry is bound to make a pretty fat target for legislators looking to prove their consumer-friendly bona fides through legislation. Not that the two are directly linked to each other in any significant way… but who can tell one credit market from another?

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Blog

Credit Where It's Due?

Looks like the Dodd credit card bill is poised to move its way through the hallowed halls of Congress. Given the topsy-turvy mortgage market, anything remotely related to the credit industry is bound to make a pretty fat target for legislators looking to prove their consumer-friendly bona fides through legislation. Not that the two are directly linked to each other in any significant way… but who can tell one credit market from another?

04/30/2008
Down The Rabbit Hole: Feds Outline Bear Stearns Collateral

The key element of the Bear Stearns bailout is a secretive government-backed loan of $29 billion to J.P. Morgan Chase. (It is for $30 billion but JP Morgan is on the hook for the first $1 billion in losses.) Bear Stearns was clearly bankrupt, but the Federal Reserve’s loan allowed J.P. Morgan Chase to eventually offer $10 a share for the firm.  That represents about a $1 billion windfall to Bear Stearns shareholders, who should have been wiped out completely for owning an insolvent investment bank.

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Blog

Down The Rabbit Hole: Feds Outline Bear Stearns Collateral

BY

The key element of the Bear Stearns bailout is a secretive government-backed loan of $29 billion to J.P. Morgan Chase. (It is for $30 billion but JP Morgan is on the hook for the first $1 billion in losses.) Bear Stearns was clearly bankrupt, but the Federal Reserve’s loan allowed J.P. Morgan Chase to eventually offer $10 a share for the firm.  That represents about a $1 billion windfall to Bear Stearns shareholders, who should have been wiped out completely for owning an insolvent investment bank.

04/02/2008
Obama Backs Bailout Measures for "Unfair" Mortgages

In his economic address today, he addressed the housing markets:

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Blog

Obama Backs Bailout Measures for "Unfair" Mortgages

BY

In his economic address today, he addressed the housing markets:

03/26/2008