Akerlof and Romer (1996) show that a moral hazard crisis can develop when banks
are able to borrow funds on the basis of explicit or implicit public guarantees. When banks are
under-regulated, they may use the funds in very risky or even criminal ventures. Krugman (1998)
argued that the Asian crisis is a reflection of excess gambling and stealing by banks that gained
access to domestic and foreign deposits by virtue of state guarantees (although, as noted, he
subsequently changed his mind, and even criticized such views in later writing (Krugman, 1999)).