83,240
edits
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
Line 9: | Line 9: | ||
On this commonplace is much of the [[Magic circle law firm|magic circle]]’s patter premised: to give them credit, they are ably aided in it by their [[In-house lawyer|in-house clients]], many of them refugees of the same brotherhood, and whose livelihoods are guaranteed by the same presumption. | On this commonplace is much of the [[Magic circle law firm|magic circle]]’s patter premised: to give them credit, they are ably aided in it by their [[In-house lawyer|in-house clients]], many of them refugees of the same brotherhood, and whose livelihoods are guaranteed by the same presumption. | ||
''If you make yourself really complicated, you can exclude virtually everyone.''<ref>With apologies to {{Author|Daniel Dennett}}’s “if you make yourself really small, you can externalise virtually everything”.</ref> | {{quote|''If you make yourself really complicated, you can exclude virtually everyone.''<ref>With apologies to {{Author|Daniel Dennett}}’s “if you make yourself really small, you can externalise virtually everything”.</ref>}} | ||
And, to be sure, should you peruse your average [[securitisation]] — here’s the prospectus for [https://capitalmarkets.fanniemae.com/media/6516/display Multifamily Connecticut Avenue Securities Series 2019-01 Notes Due October 2049] — you will soon be | And, to be sure, should you peruse your average [[securitisation]] — here’s the prospectus for [https://capitalmarkets.fanniemae.com/media/6516/display Multifamily Connecticut Avenue Securities Series 2019-01 Notes Due October 2049] — you will soon be reaching for the proverbial spoon, to scoop out your own eyes. | ||
Some 25 years ago the European Commission hit upon the idea of requiring structured products manufacturers to produce a one-page summary of the key risks of financial products being offered to the public. The document, a [[key investor information document]] became a part of financial products regulation, over the immense and highly principled objections of the legal community, on the grounds that it is ''impossible'' to adequately explain the risks of a complicated legal product in fewer than the 80-100 pages it was presently taking. | Some 25 years ago the European Commission hit upon the idea of requiring structured products manufacturers to produce a one-page summary of the key risks of financial products being offered to the public. The document, a [[key investor information document]] became a part of financial products regulation, over the immense and highly principled objections of the legal community, on the grounds that it is ''impossible'' to adequately explain the risks of a complicated legal product in fewer than the 80-100 pages it was presently taking. | ||
Line 17: | Line 17: | ||
The regulators replied, “well, if you can’t explain the big picture risks in a single page, the product can’t be suitable for the general public, can it?” | The regulators replied, “well, if you can’t explain the big picture risks in a single page, the product can’t be suitable for the general public, can it?” | ||
That our contracts must at some level, be able to be reduced to a fundamental essence isn’t just for gentle pensioners dandling grandchildren on their knees. The neurotic particularisation of risks that are, basically generic, feathers the nests of many subject matter experts. | That our contracts must at some level, be able to be reduced to a fundamental essence isn’t just for [[Ultimate client|gentle pensioners]] dandling grandchildren on their knees. The neurotic particularisation of risks that are, basically generic, feathers the nests of many subject matter experts. Even sophisticated financial institutions — ''especially'' sophisticated financial institutions — need to easily reduce their contracts to simple fundamental precepts, because that is how they risk manage them: there is no machine, and certainly no human being, in the bowels of an investment bank that is constantly reading its portfolio of {{isdama}}s to ensure every letter is complied with, every implicit buried option exploited. These contracts are reduced to a few key parameters: the tail risks are buried, filed away, to be dealt with by the legal eagles in the unpleasant event that they should arise.<ref>Come to think of it, it is a wonder there ''isn’t'' a squadron of waxen, hairless drones buried in some call centre in Bucharest rifling through that mountain of documents manually covering off that exact risk. It would make a great subplot for an [[Opco Boone]] adventure, in fact.</ref> | ||
This extra detail is, therefore heft: to the extent it confers optionality, it is optionality the organisation knows nothing about — the proverbial [[unknown known]] — or it is a put or call the organisation has sold that it is not managing in its books. We nod along and hope that, whatever happens it isn’t significant. | |||
{{sa}} | {{sa}} |