"The unregulated financial derivatives market created a shadow banking system that performed some of the same functions as the real banking systemlong dash—but without the checks and balances that keep a banking system from spinning out of control." Which of the following lessons BEST supports this comment?
A. In every battle between economic theory and reality, reality wins.
B. Leverage can be dangerous, and massive leverage can be deadly.
C. Unregulated private contracts can have damaging public consequences.
D. Transferring risk does not reduce or eliminate the risk—and sometimes it can even increase risk.
E. Individual short-term incentives can overpower logic and collective long-term consequences.
Answer: C. Unregulated private contracts can have damaging public consequences.