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(nobody, and I mean nobody, would have an internal process and not say it, since it would be a pure waste of money: you wouldn't get the reduction in required capital).

Secret autiting processes would still help you to avoid or contract out risks even if it didn't reduce capital requirements. Goldman made huge amount of money at the expence of AIG because they priced risks more realistically.

by Jute on Tue Mar 5th, 2013 at 08:08:19 AM EST
Maybe they could end up running an open auditing process to save required capital and a secret one to get rid of risks they don't want to take.
by Jute on Tue Mar 5th, 2013 at 08:10:17 AM EST
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Well... That is one view of what happened between AIG and Goldman. I think it is under investigation and I certainly don't have the elements to conclusively establish what really happened, but it seems to have been, at the very least, fishy (while possibly perfectly legal).

But anyway, most transactions involve a disagreement on the risk of an asset, or on its true value, but in the case of financial assets it boils down to the same thing since there is no direct use. So it would not necessarily hamper any bona fide deal.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Tue Mar 5th, 2013 at 09:32:03 AM EST
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