Authenticating Risk

In the depths of our current crisis of liquidity it is necessary to identify a culpability--the cause that leads to the effect.

Identifying the cause and effect is to define the problem and the solution. It is presumed the regulatory regime will reflect the culpability as we plod forward with financial reform. Critical to reform is the ability to identify the source and target of risk--who makes it, and who takes it--which would then define the remedy if not the cure for what ails us.

Who authors the risk determines its authenticity: who makes the risk takes the risk.

So, who is authoring the risk?

Former Treasury Secretary, Paulson says we need to have a "systemic-risk regulator" with "broad authority," and a strong, well-rehearsed resolution authority to bail out banks in the future (in other words, people like him). All of his proposals confirm the too-big-to-fail model of finance. It is a bureaucratic model of public/private finance (political economy).

The bureaucracy will have the authority over the risk. That is, risk will be bureaucratically authored by an independent civil service. The results (the assignment, and presumed assumption, of risk to a class or party) will then appear genuinely unbiased, legitimate and binding (what a free market will authentically do through legitimate, ontological process, a priori).

Liquidity crisis reliably consolidates the capital and avoids the alpha risk. The effective "gravitas" is conceptualized to ontologically "pull" the elements into an organized efficiency rather than teleologically "pushed" into a deliberate structure of power.

Through cyclical trend, capital is gained without being exposed to the rigors, the virtue, of free markets which is the plurality that occurs with expansion of the pie.

In a free market, the risk is authored by the plural expansion and authenticated by the strength, the virtue, of taking the alpha risk, not avoiding it. The profit replicates the success, the virtue, through distribution of the capital gained and accumulated (through capital formation and investment). If the system is pluralistically maintained in priority, the virtue of success remains vested, the risk ontologically authored and legitimately authentic.

The authenticated risk is inalienable and ontologically fractile, ensured by a competitive multiplicity of the marketplace. The authenticity authors success and continuously innovates into the provision of life, liberty, and the pursuit of happiness rather than the continuously demonstrated deprivation of a consolidating capital in cyclical trends of crises.

It is time to re-author the too-big-to-fail doctrine of consolidated risk into the doctrine of authentic self-determination.