Unlocking Credit Essay Example

lead to an output collapse (Banking, 29).The focus of rebuilding the credit market must not only concentrate on liquidity issues, but also on moral hazard issues, which have been allowed to rise as a result of de-regulation and have contributed to the collapse of credit markets. The moral hazard aspect of the crisis has generated and sustained the liquidity crisis. Chapter Three raises many questions, some of which seem rudimentary and self-evident. For example, should regulatory bodies not be responsible for maintaining the moral "rectitude" and functionality of the financial systems? Currently, accountability may be desired but not applicable in cases where the Treasury Secretary and President are involved. The consideration of "retroactive" taxes or the repeal of top-income tax breaks implemented by the Bush administration is another issue. The reality of higher corporate taxes may impact moral hazard issues in relation to the current crisis. Lastly, despite banks receiving an infusion of cash, there has been no corresponding loosening of the liquidity crisis.Doesn't the failure of cash infusions to revive the credit markets provide evidence for the proposal in Chapter Three of addressing not just liquidity but also moral problems?