Sub Prime loans: Risktaking rewarded

Corpobligation: Bailouts for banks that sold questionable mortgages suggest that lenders can avoid responsibility for their financial choices. What does this say for their social and environmental choices?

• Today, the Federal Reserve has injected another $30 billion into the financial system.
• Moral hazard is the principle that individuals and businesses will take risks because they will not face the full consequences of failure. In the context of mortgage lending, banks may lend to higher risk borrowers in the quest for profits without adequate consideration of default risk because they know they will be bailed out by the government.
  
• In the words of a great Bird and Fortune sketch,

Financial crisis can be avoided "provided that governments and central banks give us, the financial speculators back the money we have lost...[T]his is rewarding the financial ingenuity of the markets...[W]e don't want the money to spend ourselves...we want it so we can carry on borrowing and lending money as if nothing had happened, without thinking too much about it."

See the video...

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Money quote, explaining sub-prime investment vehicles: "This package of dodgy debt stops being a package of dodgy debts and becomes a 'structured investment vehicle'...I buy it and ring up someone in Tokyo...[they ask what's in it?] and I say I don't have the foggiest idea ...and they say 'how much do you want for it?' And I say 100 million dollars and that's it..."

If banks are not responsible for their financial choices then how can they be held accountable for their voluntary human rights and environmental commitments like the Equator Principles .

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