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The trading acts demands that listed companies publish regular financial reports, ad hoc notifications or directors' dealings.Whereas market participants are required to publish major shareholder notifications.
Instead, the core of the financial system became a key channel of propagation and magnification of losses suffered in the housing market.
Critical financial intermediaries failed, or were bailed out, or dramatically reduced their provision of liquidity and credit to the economy.
In this essay, I will review the key sources of fragility in the core financial system.
I discuss the weakly supervised balance sheets of the largest banks and investment banks; the run-prone designs and weak regulation of the markets for securities financing and over-the-counter derivatives; the undue reliance of regulators on market discipline; and the interplay of too-big-to-fail and the failure of market discipline.
The financial crisis that began in 2007 was triggered by over-leveraged homeowners and a severe downturn in US housing markets.
However, a reasonably well-supervised financial system would have been much more resilient to this and other types of severe shocks.