The dividing line between public and private liabilities, too often, has become blurred. *  *  *  Given that the existence of safety nets generates moral hazard, and moral hazard distorts incentives, why do we continue to provide safety nets to support our financial systems?
It is important to remember that, notwithstanding the possibility of excessive leverage, many of the benefits banks provide modern societies derive from their willingness to take risks and from their use of a relatively high degree of financial leverage.