Asymmetric information as explained by Stiglitz and Akerlof leads to many bad decisions and inefficient policies. Many have argued, and rather convincingly, that moral hazard has played a major role in the creation and the perpetuation of our current financial crisis and the previous one and the one before that also. The regulators never knew what was on the books of the money center banks and these institutions felt comfortable in carrying toxic assets on their books because they were "too large to fail". No wonder that banking CEO are possibly the least respected and most hated group in the US at the moment.
I am telling you this because I want you to hold off on your condemnation of Ken Lewis et al. Citigroup, J P Morgan Chase and Morgan Stanley announced last week the formation of "The Carbon Principles" that are to be used as guidlines while reviewing applications for funding power projects in the United States. The set of environmental standards will include a risk factor associated with carbon emissions. If I understand this correctly then these major financial institutions have taken it upon themselves to impose a penalty on coal fired power plants. Maybe these CEOs are not as villainous as they are made up to be:-)
