Government guarantees generate a multiplier effect: one dollar of tax-funded guarantees expands lending by more than one dollar. This multiplier is stronger under information-insensitive debt, as guarantees suppress costly private information production, relaxing borrowing constraints for all firms rather than merely redistributing resources. However, implicit guarantees create fragility—negative shocks to collateral quality or productivity trigger government reneging and trust collapse, causing discontinuous credit contractions. Guarantees also induce moral hazard, reducing firms' incentives to maintain collateral quality and amplifying fragility. The endogenous trust dynamics explain why guarantee crises are sudden yet persistent. Transition to market-based insurance, collateral swaps, and debt swaps offer potential avenues to mitigate crises, though each entails important trade-offs.