Tim Harford writes "If AIG had shot off its own metaphorical foot to claim a government bailout, the argument against the bailout would be compelling. But it didn't, and it isn't." But it's not AIG with the moral hazard, it's the thousands of companies that invested in them. AIG should have to call in its debts right now, but realizing the issue that this would cause in the overall economy for people such as Goldman Sachs who reportedly would take a multi-billion dollar loss, they're being bailed out. These companies are the ones who shot their feet off. They invested in AIG knowing that the piper could come calling, but now the piper is here and none of them have the cash so they're crying foul.

Too bad. Pay up or don't get the cash to begin with! That's the moral hazard!

Further, Harford states "That is partly because fire can spread, and your neighbors should not suffer for your carelessness." Oh? How are people who have paid their mortgages on time and been reasonable with their spending not suffering from the people who have failed? Now my it is my taxes that go up and my mortgage that stays the same while someone who had no business with the mortgage they received leans on me for help, and this is stopping my suffering? How exactly?

Last Harford states "Insurance companies could fight moral hazard by checking that your behavior is consistently safety-conscious. Because that's impractical, deductibles have to serve as imperfect proxies. The current bailouts are a strong argument for tighter regulation, but regulators cannot be everywhere, any more than a claims adjuster can ride around in your car all day."

I'm not asking for regulation or a claims adjuster to ride in cars, but if we let these companies fail and people could see what happens when your greed takes over, we wouldn't need heavier regulations, there would be incentive to not mess up. But now, as it stands, companies can do whatever they want and be insulated from the risks because the government will save them from their mismanagement (sounds a bit like moral hazard, no?). Examples: American and United airlines, auto industry, credit crisis, etc...