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Tuesday 23 September 2008

The Weekend Crisis and other Asymmetrical Information Challenges

Have you noticed how most of the recent financial institution failures occurred over a weekend, with financial institutions or regulatory and Central Bank interventions occurring on a Saturday or more specifically a Sunday in the United States?

Fannie Mae & Freddie Mac were officially nationalized on Monday 8 September 2008 after the announcements were made over the weekend (Sunday 7th September 2008), Lehman Brothers failed well before the weekend of 13 & 14 September 2008, yet the announcement again arrived early on the morning of Monday 15 September 2008 (at least early morning in Europe, again pointing to news leaking out on Sunday in American). Going back to March 2008, the Bear Sterns announcement, again was made on Sunday 16th March 2008?

With heads being scratched and fingers being pointed in all directions, conversations featuring themes such as excessive greed by bankers, an aggressive bonus culture, misunderstanding of financial products being bought and sold and a light regulatory touch, all abound.

Well here is the simple solution and it falls squarely within the remit of the regulators to enforce and execute:


Yes, stop this ridiculous notion of coming out with bad financial news on a Sunday. Ensure that trading financial instruments can occur 7 days a week 24 hours a day. Most of the tools (computerized trading platforms, algorithms, etc.) do not require ‘downtime’ and switch off time, like us mere simple mortals do.

My conclusion is that with one simple regulatory intervention, most of the "Weekend Crisis" we experienced during this last year, would have been avoided.

© theMarketSoul 2008