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Guaranteed to Fail by Lawrence J. White, Viral V. Acharya, Stijn van Nieuwerburgh, Matthew Richardson

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TOO BIG TO FAIL

Once one agrees to share a canoe with a bear, it is hard to get him out without obtaining his agreement or getting wet.

—Congressional Budget Office, “Assessing the Public Costs and Benefits of Fannie Mae and Freddie Mac” (1996)

On October 5, 1999, in a speech entitled “Toward a 21st Century Financial Regulatory System,” then treasury secretary Lawrence Summers, and later director of the National Economic Council in the early Obama Administration, said: “Debates about systemic risk should also now include government-sponsored enterprises (GSEs), which are large and growing rapidly.”

Several months later, on March 22, 2000, in ...

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