Left to itself the market will cherry-pick, leaving swathes of bad risks for taxpayers to finance.
It is clear that specific protective structures and mechanisms established to secure institutions from bad risks and poor decisions--such as banks' boards--failed to deliver.
One is adverse selection: the people who most want to purchase insurance are those who are most likely to need it ie, the bad risks.
Instead they have been used to bail out risk-takers who took very bad risks, increasing our collective debt and deficits at the expense of long-term productive economic capacity.
The vast majority of us could wind up being bad risks because genetically most of us will probably show we are susceptible to something and therefore we will become uninsurable.
While an applicant with good credit is more likely to be approved for this standard card, there are some places that will offer unsecured credit cards for bad credit risks.
And for those who claim now that lending disappeared in the fall of '08, surely it did for bad credit risks and otherwise insolvent institutions, but according to the same study, as of Oct. 8, 2008, there was no evidence of a decline in business and consumer loans.
In fact, the financial industry and its powerful lobby have opposed modest safeguards against the kinds of reckless risks and bad practices that led to this very crisis.
The negative corollary to these bailouts is that certain institutions have not been allowed to fail, and, those who knowingly took certain risks are no longer expected to take losses when those risks go bad.
No doubt they had told their friends and family back home - as I have time and again - that generally things in Mexico aren't too bad, that the risks sound worse than they are.
The rise, an increase of 95% on the same quarter in 2012, came as HSBC reported a big fall in losses from bad debts and provisions for other risks.
Until recently, the Securities and Exchange Commission appeared dismissive of the risks of such "bad actors" funding their activities with the unwitting help of American investors and portfolio managers.
Azazel Jacobs directed this maudlin yet feel-nothing feature, which risks giving independent filmmaking a bad name.
It is also proposing to beef up its existing register of borrowers to allow banks to determine more accurately which credit risks are good and which bad.
It's one thing to punish those who willfully commit fraud and other well-defined crimes, quite another to jail or ruin people for bad judgment, mistakes or for taking risks that go wrong.
"Overzealousness about trivial risks gives health and safety a bad name but there are actually many more cases where people are under-hitting, " said Roger Bibbings, occupational safety adviser for the Royal Society for the Prevention of Accidents.
It will also verify that fresh euros are not freely available to bad investors with all the long-term inflation risks that entails.
Another thing worrying Congress is that bailing out banks that have made bad decisions will encourage them to take even greater risks in the future - the so-called moral hazard problem.
But doing so would carry greater economic risks, potentially raising already-high levels of bad debt in the banks and curbing consumer spending.
Concentrating debt auctions on fewer, pre-announced dates risks them falling on days when the markets are in a bad mood.
They are also saying that price discrimination, whether to take advantage of differences in patients' risks or differences in their ability to pay, is not such a bad thing.
Also on June 9th, the Congressional Oversight Panel published a report that questioned the stress tests' reliance on banks' own data and their failure to capture the full risks in asset classes, particularly commercial property, that are only now going bad.
Unlike Latin American governments, some of whom are recidivist bad debtors, Caribbean countries, with stable currencies and democracies, until recently looked like good risks.
Whether those risks will be rewarded with a Golden Raspberry award and a place in the canon of memorably bad films remains to be seen.
Those drive employees to take big risks to reach the target, knowing that they stand to lose little if their bets go bad and the company loses money.
The bad news is that a one-in-five chance of recession reflects the fact that so many significant risks threaten the still-fragile recovery.
Banks need to take measured risks, and our economy requires that banks be able to make loans in both good times and bad.
FORBES: Why More Bank Capital Won't Cure All The Economy's Ills
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