Do the right thing in a recession

Thanks to decades of prudence, you're financially sound. But others in your life can't say the same. Your spendthrift son has lost his well-paying job and says he'll lose his Porsche if you don't take over the payments. And your best friend needs a loan to help with his daughter's tuition -- a loan you're uncertain he can repay.

What to do

Economists worry about moral hazard -- the idea that rewarding bad behavior encourages more of it -- and so should you. Good times or bad, there's little virtue in throwing money down a rat hole, no matter how much you love the rat. What your son needs more than your money is a lesson in personal responsibility. As for others more worthy, try to help them (a) if you can and (b) if their request seems reasonable -- reasonable to ask of you and reasonable in that the situation genuinely merits intervention. But be careful. Even in the best of times, personal loans frequently go unpaid, and no law of ethics requires you to lend money you can't afford to lose.



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