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Except that the size of the future liability is not known

"More than banks, life insurers, or predatory loan originators, government sponsored enterprises led the mortgage market into the abyss.  In the second act, we are likely to see the federal government guarantee auto warranties, public and private pensions, municipal bonds, and even home loans.  Federal guarantees encourage risk-taking by the insured at the expense of the taxpayer. Crisis is practically inevitable (italics added).

Guarantees are structurally very similar to debt, except that the size of the future liability is not known...

The systematic risks being created by the Federal Reserve and the Treasury eclipse those created by the private sector by gargantuan proportions."

Steve Francis in letter to WSJ 8/25/09


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