Recovered from a working directory during a routine migration. Retained here because its removal would require a decision, and decisions require a decision-maker.
Colleagues,
A question has been raised at two recent meetings and should be answered once, in writing, on the understanding that this document does not exist.
The question is whether the widespread adoption of our methods presents a risk to the environment in which we operate. It does. The risk is not regulatory, competitive or reputational. It is structural, and we should be clear-eyed about it.
Our entire product suite converts identifiable responsibility into distributed exposure. Individually this is efficient. Each client relocates a liability, each counterparty is compensated, each transaction is lawful, and the aggregate quantity of harm in the world is unchanged. Nothing is destroyed; something is merely never anyone's.
The difficulty appears at saturation. A market economy does not require honesty, and it has never had much. It requires only that when something fails, there exists a party who can be made to answer for it. That party is what makes a contract enforceable, an audit meaningful, an insurance premium calculable and a court useful. The entire apparatus of commercial trust rests not on virtue but on the continued existence of someone to hold accountable.
Our methods do not defeat accountability. They dilute it, which is more durable and, at scale, more corrosive. When one institution places its exposure with eighty-eight thousand counterparties, the system absorbs it. When every institution does, there is no longer a residual holder anywhere, because everyone is a transferor and no one is a terminus. At that point the question who is responsible for this stops having an answer, and shortly afterwards it stops being asked.
A system in which the question is not asked does not become unjust. It becomes unpriceable. Risk cannot be quantified where fault cannot be located; capital cannot be allocated where risk cannot be quantified; and credit cannot be extended where capital cannot be allocated. The failure is not moral. It is arithmetic, and it is terminal.
We should therefore be candid about the position we occupy. Our commercial interest is in the continued adoption of our methods. Our institutional interest is in that adoption remaining partial. These are not the same interest, and the second one has no department, no budget and no advocate at any meeting we attend.
Recommendation: none. The recommendation would have to be made by someone, and would then be theirs.
Unsigned, in accordance with standing practice.