Match: Perverse incentives that encourage risky behavior by people who don't actually bare the risk The era discussed in lecture characterized by a large middle class and traditional Keynesian policy The implicit policy that holds that financial 1. Too Big to Fail institutions can become so large that their failure 2. Mortgage-backed Security would not be tolerable from a policy standpoint 3. Credit default swap A policy regime in which 4. Moral hazard aggregate spending (AD) is supported through household debt in 5. The Golden Age of Capitalism connection with an 6. Privatized Keynesianism expanded and increasingly complex financial sector2. Mortgage-backed Security 3. Credit default swap 4. Moral hazard 5. The Golden Age of Capitalism 6. Privatized Keynesianism.