Kansas Fed on moral hazard in lending
A Kansas City Federal Reserve paper published in September measures the agency problems between commercial lenders and borrowers and finds that moral hazard poses a greater danger to lending than adverse selection in the syndicated loan market.
Nada Mora, the paper's author, distinguishes between the problem of adverse selection, whereby the lead arranger has a private informational advantage over participants, and moral hazard, whereby the lead arranger puts less effort in monitoring the
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