Hedge funds

The phrase, “moral hazard” first came to my attention in the 1980’s S@L scandal. This cost the government $125 billion ($485 billion in todays dollars). S&L’s were lending money to finance homes and business and when interest rates rose they could not recoup their investments and many went bankrupt. The problem was further exacerbated when the government, because of political reasons, slowed the funding to save these companies. Next came the mortgage crisis of 2008 when banks made loans without proper due diligence and millions of home owners found themselves under water and the government stepped in with a $700 billion dollar cost. The country is now facing another situation with hedge funds. These funds have used extreme leverage to dig up cash to buy companies and now they are in need of cash to pay the interest on their debt. They are starting to look for assistance from the government. This is from an article written on 4/15/2025 BREAKING: Fed Preps $2T Bailout as Hedge Fund Trade Implodes Notice the trend. $485 billion to $700 billion to $2 trillion. The phrase moral hazard means the investors keep the profits and when things go bad the government picks up the tab. It will be interesting to see of the Turmp administration handles this case differently.