Hard evidence: bailed-out banks take more risk

"Overall, the analysis of banks' investment portfolios suggests that CPP [TARP] participants actively increased their risk exposure after being approved for federal capital. In particular, CPP recipients invested capital in riskier asset classes, tilted portfolios to higher-yielding securities, and engaged in more speculative trading, compared to nonrecipient banks with similar financial characteristics."

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The bail-out itself increased our chances of having to bail the banks out all over again. Moral hazard is no longer in the realm of the abstract. Further, my guess is that the bailed-out banks took on more risk so that they could earn enough to speed repayment of the aid and therefore escape the onerous strings attached. So perhaps the limits on executive compensations, dividends, etc. in a perverse way increased our chances of having to re-bail the banks.