I'll take these one at a time:
Securitization of loans = moral hazard.
This is the most important point, the underwriting function is performed by a bond ratings agency that's hired by the firm securitizing the debt.... the only risk they have is reputation risk. If a firm (AIG for instance) or quasi government agency (Fannie, Freddie) insures that risk then the underwriting standards are their responsibility (and thus not much moral hazard, until we get to the below).
Lending out other people's money with next to no reserve requirement = moral hazard.
This is a dumb point, there is a reserve requirement for this reason. The risk this addresses is liquidity risk.
Earning bonus pay based on only short-term financial performance while taking huge long term risks = moral hazard.
Another good point, and one that I doubt will be properly addressed anywhere......
Banks that are "too big to fail" and then take outlandish risks knowing taxpayers will stump up the funds = moral hazard.
Who are banks really, are they shareholders? The shareholders were fleeced in this process (ask anyone who owned Wachovia shares). Bank management, go find Ken Lewis. The taxpayers bailed out (forced acquisitions or injected capital) to benefit the economy and the system, not the banks.
Regulation designed to reduce or eliminate the above = reduce or eliminate moral hazard.
Which is why you'll never read me saying that banks should not be regulated, conservative and sensible regulation is what we need, not what we have or what we're likely to get. There is too much ignorance in Washington and too much populist nonsense for the US to get sensible banking regulation.
OTB
