The failure here was also with the advice they were given – which was immoral, which is why I conclude:

“Remember, if you are complaining about “moral hazard” you are attacking
bondholders – not so much the banks (who are easy to demonise because
they wear suits), but the people who leant money without considering
risk and those who advised them.”

Also, I’m sorry but I can’t be particularly sympathic to anyone who went and rolled all their money into a single finance company to earn a half percentage point more because they assumed things would never fail. It is no different to me than if they’d done the same thing with lottery tickets.

I had family who did that as well, no matter how much I’d try to say it was a bad idea the extra 0.5% was just too tempting.

Investors have the right to better information, and they aren’t going to go around “actively managing their portfolio” – few people should do such a thing. But not putting your eggs in one-basket is a principle we were taught in primary school, and no matter how old the person is they should be doing that – I don’t see why anyone else should be responsible for someone not doing this.

Banks already provide a “risk-free” place to put your funds due to the govt guarantee … so if these funds were so important to people why were they throwing them into risky investments for little return? Part of it is that financial advisers were dodgey – and that needs to be fixed. Part of it is that people were just being greedy, and if you take on that risk you should accept when you get burnt.

The crisis showed that people need to recognise that there is risk with return – and hopefully we come out of this with financial advisers that actually serve people instead of taking advantage of them. But none of this changes the fact that when we bemoan “moral hazard” publically, the culprit is the bondholder, the saver who expects a government guarentee to socialise their potential loses.

Yes