Yes, Keynesian solutions do have moral hazard built in. Everyone, including Minsky, who I quoted from, recognizes that moral hazard allows for stuff like 2008, where everyone involved, homeowners, bankers, legistators paid off by the real estate industry (the largest contributors to campaigns on the local level), and gov't idiocies like Fannie and Freddie, not to mention FHA loans, the FHLB, the mortgage interest and property tax deductions (all backed of course by that same real estate lobby & those same legislators) all contributed to making 2008 what it was.
But 1932 featured NONE of that stuff. It also featured a gold standard. Bubbles predate the Fed, they happened when gold backed money, they happened after gold stopped backing money, and they will happen no matter how societies choose to do these things in the future, simply because human beings are greedy. So, get over that argument: bubbles happen. Period, the end.
Now, the moral hazard built in to Keynes is less bad than what would have happened post 1932 if FDR had not been elected. Even with his election, the Communist Party became a potent third party during the thirties. The only thing that stopped it was the non-aggression pact with Nazi Germany perpetrated by Stalin.
Sustained bad times bring on extremism, and they also bring on a call for strong government. Between WWI and WWII Europe got Lenin, Stalin, Mussolini, Franco, Hitler, and a bunch of lesser Communist/Fascist/Nazi regimes in smaller countries. We remained free of all that, and a large part of the reason why is wrapped up in the alphabet soup of programs like the WPA and all the rest that kept people hoping that things would get better.
You need to give people hope while the debt-deflation cycle works itself out. If you don't, extremely bad things can and will happen. No matter what you think of FDR, he was nowhere near as bad as any of those European despots.
As for the silly argument that without any of this we'd get a Depression and things would get cleaned out and all would start over and we'd all be fine: last time around, the '29 crash happened six months into Hoover's term. They had three and a half years to show if that argument was valid the last time. By the time FDR got in, the economy was at a dead stop. The only reason you guys can even begin to make any sort of argument for this kind of utter nonsense is that most of the people who went through that three and a half years of hell are dead.
This time around, Obama passed his first stimulus, and unemployment stopped getting worse after that, and that was about six months after Lehman. Even his timid pass at the banks managed to keep things from getting worse on that front. In large part he was assisted by the stuff put in place in FDR's first 100 days: the FDIC, which quietly wound up lots of banks with little fanfare and <i>no runs on any of them</i>, and the Fed, which was forced, by Glass-Steagall, to meet regularly to consider monetary policy. That latter requirement meant the Fed wouldn't repeat the mistake it made in the early Thirties of basically ignoring the worsening economy.
Last time, the deterioration didn't stop until FDR walked in, three and a half years later. This time, it stopped six months later, after Obama walked in. That's not evidence that just leaving things alone works, not to any sane and rational person, anyway.
So here you sit, beneficiaries of FDR's wisdom and Obama's actions, however timid, and claim that if both of them had done nothing, everything would be just fine. History argues otherwise.