> Banks that have an implicit (or explicit) guarantee of bailout are making rational decisions about risk, since they can offload it on the taxpayer.
Agreed. From their perspective it's a sound and rational play - a better term would be to say we can't rely on banks to make moral or ethical decisions from a society perspective
The shoe was on the other foot once: "Morgan helps end the Panic of 1893
Gold certificateOn February 20, 1895, J.P. Morgan & Co. led a bond offering that helped rescue the United States from a severe two-year economic depression."
https://www.jpmorgan.com/country/US/en/jpmorgan/about/histor...
The modern era of Wall Street bailouts started in the '80s after the Mexican Peso crisis.
Bank bailouts have been happening since Colonial times, through emergency suspensions of specie payment, par laws, legal tender laws, etc.
> we can't rely on the banks to make sound financial decisions
Banks that have an implicit (or explicit) guarantee of bailout are making rational decisions about risk, since they can offload it on the taxpayer.