Moral hazard

A few days ago I wrote about the Occupy movement and their Rollover Jubilee program to buy up debt and forgive it. The Marketplace Radio program, which reports on economic news, did a feature on the Jubilee. They noted the term did indeed come from the Old Testament. Then they talked about moral hazard. If people know they can take out loans and not have to pay them back, they won't.

I'm so tired with that argument. So I replied. This is what I sent to the show:

If the Rolling Jubilee is buying debt for pennies on the dollar it isn't a case of the borrower won't pay back the debt, but can't pay back the debt. So it is right to forgive it, clear the books, and move on. Moral hazard, you insist? Let's talk about the moral hazard of putting people into mortgages there is no hope of repaying, ruining their credit score in the process. How about the moral hazard of betting on the economy to crash and reaping millions (maybe billions) from the misery of others. Perhaps we talk about the moral hazard of messing up the refinance process and foreclosing on the homeowner anyway. Let's consider the moral hazard of taking a government bailout then paying executives big bonuses. Then there is the moral hazard of demanding lower taxes to push up the cost of education, burdening students with giant loans. There's even the moral hazard of unaffordable health insurance so those without get stuck with impossible medical bills. Please stop sticking it to the victim.