Template:Notification of default paradox: Difference between revisions

Template:Notification of default paradox (view source)

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 Now you can ask your customer to [[covenant]] or [[warrant]] that it is, and remains, [[solvent]] and that it debt load will not exceed a certain threshold.
-But this is a tree in a distant forest. You cannot hear it. No-one else is talking. You rely upon your counterparty to pass this information to you, on pain of that failure being itself an event of default.
+But this is a tree in a distant forest. You cannot hear it. No-one else is talking. You rely upon your counterparty to pass this information to you, on pain of its failure to do so being itself an [[event of default]].
 Remember Bishop Berkeley. The actual information, that your customer has exceeded an arbitrary level of indebtedness that your credit department set for its own inscrutable reasons, matters, presumably, to your credit department, but not, in the particular, to your counterparty. It finds no call to articulate that fact. As far as the counterparty is concerned, no good can come of it.
+Game theory comes into play here. If there are two evils, breaching a covenant and not owning up to it,  the latter is the lesser. If they don’t know about the sheep, why let yourself be hung for a lamb?