2008 SUBPRIME MORTGAGE CRISIS AND HOW TO AVERT ANOTHER

The United States domestic subprime mortgage crisis did not occur overnight, nor can it be cured overnight. It had been building up for several years. The bubble finally burst in September 2008 and sent devastating waves throughout the world’s financial markets.

To appreciate the size of the crisis it is important first to take a quick look at the numbers. The U.S. mortgage market is estimated at $12 trillion of which over nine percent are currently delinquent or in foreclosure. Subprime loans represent only 6.8 percent of mortgage loans yet currently they represent 43 percent of foreclosures; in 2007 1.3 million properties were subject to foreclosure filings, an increase of 79% from the previous year.

There were several reasons for the crisis. First, banks and mortgage lenders, challenged by ever-increasing domestic competition, made too many high-risk home loans to borrowers with either poor credit or whose income did not justify the monthly mortgage payments and to those who were unable to make a meaningful down payment. Rising home values and poor lending practices over several years had encouraged homeowners to refinance, more often than not by way of adjustable rate mortgages. Additionally, overbuilding during the boom years created too much supply exacerbating a decline in real estate market values.

Interest rates began to rise in 2006 and this further contributed to a decline in home values in many parts of the United States making refinancing more difficult. This triggered an increase in defaults and foreclosures. The situation accelerated considerably and far faster than anyone anticipated and led to the global financial crisis of 2008.

How did this essentially domestic United States

subprime mortgage problem turn into a global financial crisis?

Traditionally banks provided finance to their customers to buy homes and took as security a mortgage on the properties. The banks retained the credit risk until the customer finally paid off his mortgage. This practice changed as a result of clever and intricate financial innovations whereby lenders sold to third parties the rights to receive the mortgage payments and at the same time off-loaded the accompanying credit risk. This process is termed”securitization.” These securities are called “mortgage backed securities” or “collateralized debt obligations.”

These mortgage backed securities were then packaged in multi-million dollar ‘lots’ and sold to, or underwritten by, the investment banking community which then sold them to investors throughout the world. As more and more homeowners defaulted, the amount of cash that flowed back into the mortgage backed securities pool dried up. This resulted in international financial mayhem.

At the present time the international community and the world’s central banks are working feverishly to come up with an acceptable band-aid. Without a quick fix, there will be more bank failures and a shut down in lending. This credit crunch will stifle the world’s economies in all sectors, manufacturing, wholesale, retail and distribution. No sector will escape the ripple effect.

But a quick-fix is not a solution to avert another mortgage crisis. Steps to be taken to limit the risk of a reoccurrence of the present crisis include, but are not limited to, improving the transparency of the financial instruments involved in securitization. The instruments that currently evidence mortgage backed securities are complex even to the most sophisticated investors. Greater transparency would allow for more efficient monitoring; Sensible and practical regulations by federal regulators; credit rating agencies to make their reports more informative and demonstrate greater clarity; Commercial banks to provide more information about their off-balance sheet activities; The trading of mortgage backed securities, or other derivatives, to take place only on regulated exchanges; a standardization of documentation and instruments; The world’s central banks insisting that commercial banks operating under their auspices should have more capital and less leverage and Greater effective government supervision.

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American Economy Crisis

What began as an American financial crisis in September quickly spread into a global panic that sent stock markets from Reykjavik to Moscow tumbling by anywhere from forty to sixty-five percent, declines unmatched since the Great Depression of the 1930s. The proximate cause of the crisis was the collapse of several large investment banks, but the real cause was the risky get-rich-quick schemes cooked up by the banks and backed by poor investments and the Federal Reserve’s low interest rates.

Investment banks like Bear Sterns and Lehman Brothers collapsed because they could not cover their commitments when the securities they held declined in value as a result of the collapse of the U.S. housing market. The decline in home prices made cleverly-packaged securities that rested on mortgages worth less and less, stripping wealth from the system and forcing banks to cut lending. The result froze the flow of credit, bringing the economy to a halt.

None of this could have been possible, however, without decades of low interest rates by central banks like the Federal Reserve. Central banks came to believe that the correct response to financial difficulties was to cut the interest rates they charge to investment banks. These historically low rates meant that banks could pump money into the economy, but at times there was so much money that they began making ever-riskier investments to keep pace with the flow of cash from the central banks. The result was the great housing bubble of 2001-2006, and the subsequent problems caused by its end.

All information about the American financial crisis and the world financial panic can be found with the experts in academic research and writing services, The Paper Experts. Their trained, expert writers and researchers hold advanced degrees in their fields and can produce expert-level reports on the causes and consequences of the financial meltdown.

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Ancient Egypt – essay

Ancient Egypt : Color of life – Slavery

Thanks to Hollywood, many people still believe that the ancient Egyptians utilized vast armies of slaves to build the pyramids. This view is based in part on the biblical account in Exodus of the Jewish people being held in bondage in Egypt. However ancient Egyptian slavery was very different from the more familiar types of slaves found in Greece, Rome, or the pre-Civil War United States.

Egyptian slaves were known as Hem, but they were not completely under the domination and control of masters. Instead, Egyptian slaves were persons who had lessened rights and were dedicated to service. One could find oneself a slave through debt bondage, capture in war, or several other situations that resulted in reduced status. However, many slaves had better and more comfortable lives that free peasants who worked the land. In addition, it was considered a moral duty to treat slaves well. Some slaves were even freed by their masters and went on to live as free peasants.

Originally, hemu (plural of hem) were restricted to temples and royal households, but over the course of Egyptian history they became more widespread throughout society. During the Old Kingdom (2575-2150 BCE), the first private individuals owned slaves. By the Middle Kingdom (1975-1640 BCE), slaves were being imported from Asia.

As for the pyramids, however, they were not the result of Hollywood’s vision of massive slave armies pulling blocks up the sides of the pyramids. Instead, free Egyptian peasants are believed to have built the pyramids during the months when they could not grow grain in exchange for food from the Pharaoh’s reserves of grain. Oddly enough, slaves of the royal household may well have been supervising the free peasant laborers!

The Egyptians worked hard at building the pyramids because they believed they were intimately connected with the realm of the gods. For the ancient Egyptians, the pyramids, the slave system, the royal household—all were part of a divinely-ordained order in which the Egyptians were the center of creation. The pyramids were expressions of the religious belief that the bodies of the dead needed houses of eternity in which to live so that they would be ready for the resurrection, when the soul returned to the body for a new, eternal life.

Ancient Egyptians believed in many gods, and at various times different deities were considered among the most important. One of the most important throughout the centuries was Osiris, the god of death and resurrection, who was believed to preside over the realm of the dead and give the souls of the departed eternal life. His wife was Isis, the goddess associated with mothers, wives, and slaves. Their son Horus became pharaoh and ruled Egypt in its golden age. The most important god in later Ancient Egypt was Amun, the ram-headed king of the gods. In his composite form as Amun-Ra, he was also god of the sun.

Egyptian religion was practiced largely within the temples, large stone structures occupied by priests. Most Egyptians would never enter a temple and would have little contact with the religious ceremonies therein except for the public festivals when statues of the gods would be paraded outside the temple for public viewing. Nevertheless, the Egyptian people felt a strong attachment to their faith and their gods for thousands of years. When the pharaoh Akhenaton (reigned c. 1351-1336 BCE) tried to upend Egyptian religion and declared there was only one god, the sun disc, the priests and common people opposed him, and the old gods were restored.

Egyptian religion would continue for more than a thousand more years, even during the Greek and Roman occupations, until it was replaced by Christianity and then Islam, the religion of most Egyptians today.

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Sample outlines for research papers

A Sample Outline for a Research Paper

 

Writing a research paper is easier than it looks once you know the secret formula that makes it as easy as plugging in names and dates. What is this great secret to writing the perfect research paper easily? The answer is: developing a clear, concise outline.

            Creating an outline allows you to organize your ideas and information before you start writing. This, in turn, gives you the ability to decide what to write and how to write it before you start, saving you time and effort. Better still, once you have the hard part (plugging in the names, dates, and facts) in your outline, essay writing is as easy as turning your work into complete sentences.

            So, how does the magic of outlining work?

            Well, first the bad news: You still need to do research and think about what you’re writing. This means doing the legwork of going to libraries and databases to gather information and work on developing a thesis. After that, though, outlining helps speed things up.

            An outline begins by ordering the information to present in an essay. You start with the introduction and thesis statement and then move on to presenting your evidence to support your thesis. These are your major topics and the supporting details that provide evidence proving they are true. You do this by arranging your information in order of importance, from main ideas to supporting details.

            Most research papers follow a standard template, which you will find below. Short essays make a paragraph out of each of the Roman numerals in the sample below. Longer essays would make a section out of each Roman numeral and a paragraph out of each capital letter. Thesis-length manuscripts might make a chapter out of each Roman numeral. In other words, you can scale the sample outline for a research paper up or down for an essay of any length.

 

I. Introduction

A. Opening Thought

B. Thesis

 

II. First Major Topic

A. Supporting Detail

B. Supporting Detail

C. Supporting Detail

 

III. Second Major Topic

A. Supporting Detail

B. Supporting Detail

C. Supporting Detail

 

IV. Third Major Topic

A. Supporting Detail

B. Supporting Detail

C. Supporting Detail

 

V. Conclusion

A. Restate Thesis

B. Closing Thought