What was the “moral hazard” in the case of the SVB failure?
Excellent question...The term “moral hazard”, as applied to venture capitalism, has apparently gone out of vogue in the aftermath of the 2008 crash.
“Moral Hazard”...a couple of definitions:
“The risk that an individual or organization will behave recklessly or immorally when protected from the consequences.”
and
“The prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk.”
The bailouts of 2008 set the stage for more bad/immoral behavior...there has to be consequences to clear out “mal-investment” and prevent further need for bailouts of depositors.
(This includes the venture capitol depositors at SVB).
“Risks are socialized and profits are privatized” is a moral failing.