But these bond issues simply replace one form of liability with another.

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Consolidating everything, the only interest cost associated with the outstanding ELA debts stem from the fact that the Central Bank incurred a large Intra-Eurosystem liability via the TARGET2 system when the IBRC depositors and bond investors were paid off and moved their money abroad.

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But the effect of the new laws, says Michael Williams of the Bond Market Association in New York, could be simply to push secondary-market participants, fearful of liability, out of the sub-prime business altogether.

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