Moral Hazard And Preventing In The Contingent Government Liabilities

Moral hazards in the bank system are regarded as an important reason for financial crisis. Moral hazards in the government's contingent liabilities are the important factor of causing financial hazards too. Therefore, in market economy, determining and evading moral hazards in the government's contingent should be paid attention to. Contingent government liability is the liability which must be paid by the government, when some uncertain incident happens in the future. It is uncertain, uncontrolled and unmoral. In our country the main contingent government liabilities are the harmful capital and the paying defect of financial organization, all kinds of pubic social fund, especially the defect of paying of the social safeguarding fund, and the government's financial guarantee. International bank's reports estimated that our country's contingent government liabilities had been over 50% in GDP by the bottom of 1998. These liabilities are not the government's real liabilities. But, once some incidents appearing, most of them are certain to be paid by the governments. Contingent government liabilities are the results of the accumulation of citizen economy's deeply contradiction. It becomes financial crisis and country's crisis by enterprise, bank and finance. Forming contingent government liabilities have many reasons. The flaw of institution is the main reason. The government's behavior is the direct reason. The flaw of marking is the micro reason.Moral hazards are that people who engaged in economic activities do some disadvantageous deeds to others when they do their best to increase their own profits. Moral hazards in the government's contingent liabilities exist in state-owned economic structure of "Trinity" of enterprise, bank and government. They also exist in the relation of entrust ion and agency, which one side is the central government and the other side is the bank institutions, state-owned enterprises and the local governments. The entrustion-agency problem is the problem about the side of entrustion's encouraging and restraint to the agent, which is produced by the inconformity between the subjects of their profits. The "Trinity " state-owned economic structure about enterprise, bank and government exists in the relation of entrustion and agency between the central and state-owned enterprises, the central government and state-owned banks, the central government and the local governments. From the state-owned property managers relation of entrustion-agency, we can see that their problems in clued the lacks of the valid supervising and competing of the entrust ion-agency, the administration of the entrustion-agency relation, the lacks of market environment of the entrustion-agency relation and the dissymmetry of the entrustion -agency information and so on. So they produce the moral hazards of public finance system, the moral hazards of financial institutions and the moral hazards of state-owned enterprises. These morals hazards make the macro economy subjects and micro economy subjects' behaviors abnormal, cause the unjust of distribution, lower the moral standard of the whole society and influence validity and heath movement ofeconomy.The basic way of preventing and resolving moral hazards in the government's contingent liabilities is to arrange normal institution, expose information enough and promote social moral rationally. The first is basic, which requires reforming the function of the government deeply, state-owned enterprise and state-owned bank of the whole country. The second is the necessary condition. The third is elementary, which requires establishing ethics and moral of property rights, believes and the market's subjects' power, duty and profit.