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Russell Paquette liked auction-rate securities (ARS) as much as the next treasurer. At Recreational Equipment Inc. (REI) in Kent, Wash., he had been particularly attracted to those backed by student loans. “They were AAA-rated, over-collateralized by 30% and roughly 97% guaranteed by the Department of Education,” the REI treasurer points out. But when asset-backed investments began to lose their auction market liquidity, an alert Paquette bailed out of ARS investments. “We exited that market in December and January,” he notes. “We were fortunate.”

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