Banks, auto companies, California: If an entity can make the case that it's is too interconnected with the economy, that it is "too big to fail," then it seems it can now expect a bailout from the government

This creates what economists call "moral hazard," the idea that markets will be ruined by players who need not worry they will be properly punished for risky economic decisions. It certainly isn't fair that prudent individuals, companies, even thrifty countries like Germany, now have to pick up the tab for those who lived beyond their means during the boom years.

But what are the consequences moving forward? Have we set the stage for the next speculative bubble and an even deeper depression?

A former boss at the Bank of England thinks so. Deputy Governor John Gieve argued last month that banks are back to their bad habits:

"Moral hazard is a real issue now. In recovery, this could make the next cycle much worse. There are already signs of that."

"I think it is a very consequential act for the Fed to lend to an institution that it has no supervisory relationship over. It creates an enormous risk of moral hazard. To limit that authority in the future is a way to help reduce the risk of moral hazard, by the exceptional response the government's made in this case."

But many policy makers in America think that the federal government can set limits. Here's Treasury Secretary Timothy Geithner's take: Former Federal Reserve Chairman Paul A. Volcker also argued that a few tweaks in regulations, as well as clearly defining who gets access to the "official safety net," should do the trick.

Wharton finance professor Jeremy Siegal isn't convinced that we need to worry about moral hazard since executives have learned their lessons. Furthermore, today's crisis was not caused by moral hazard, in the professor's view, because the Masters of the Universe actually thought their investments were sound.

I'd like to hear your thoughts on the moral hazard of the bailouts in the comments section below.