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They gear up their capital 30 times, relying on the margin between swap spreads on investment-grade debt and the prospects of default.
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Most charge nominal fees for the guarantee of liquidity, analysts said, and some banks did not properly reserve for the risk since the prospect of default seemed remote.
Until Friday EU executives have refused to countenance the prospect of default and the issue has not been discussed at any official level.
The next year the state's court of appeals ruled it unconstitutional.Still, the prospect of default is not quite as remote as these comforting comparisons suggest.
The sheer fright that that prospect of default imparts may or may not be enough to jerk all sides out of their posturing.
And it would raise the prospect of default by Greece and could prompt its exit from the euro union — a departure whose regional consequences are hard to predict.
"The full consequences of a default — or even the serious prospect of default — by the United States are impossible to predict and awesome to contemplate," he quoted Mr. Reagan as writing.
"The full consequences of a default or even the serious prospect of default by the United States are impossible to predict and awesome to contemplate," Mr. Reagan wrote at the time, according to Mr. Carney.
Because the agency has $56 billion in assets — most of which is invested in Treasury bonds — it is not facing any prospect of default in the short term, officials said.
As part of the euro zone, these countries do not have the ability to print their own money to stimulate growth and bolster exports, so increasing debt and an increasing prospect of default result.
There is no immediate prospect of default (although markets may be spooked when Greece leaves the strictures of a bail-out programme for the first time in five years).
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