Wednesday, July 31, 2019

The Host Chapter 40: Horrified

I slowed when I heard the sound of voices. I was not close enough to the hospital for it to be Doc. Others were on their way back. I pressed myself against the rock wall and crept forward as quietly as I could. My breathing was ragged from running. I covered my mouth with my hand to stifle the sound. â€Å"†¦ why we keep doing this,† someone complained. I wasn't sure whose voice it was. Someone I didn't know well. Maybe Violetta? It held that same depressed tone that I recognized from before. It erased any notion that I'd been imagining things. â€Å"Doc didn't want to. It was Jared's idea this time.† I was sure that it was Geoffrey who spoke now, though his voice was a little changed by the subdued revulsion in it. Geoffrey had been with Trudy on the raid, of course. They did everything together. â€Å"I thought he was the biggest opponent to this business.† That was Travis, I guessed. â€Å"He's more†¦ motivated now,† Geoffrey answered. His voice was quiet, but I could tell he was angry about something. They passed just half a foot from where I cringed into the rocks. I froze, holding my breath. â€Å"I think it's sick,† Violetta muttered. â€Å"Disgusting. It's never going to work.† They walked slowly, their steps weighted with despair. No one answered her. No one spoke again in my hearing. I stayed motionless until their footsteps had faded a little, but I couldn't wait until the sound disappeared completely. Ian might be following me already. I crept forward as quickly as I could and then started jogging again when I decided it was safe. I saw the first faint hints of daylight streaming around the curving tunnel ahead, and I shifted into a quieter lope that still kept me moving swiftly. I knew that once I was around the gradual arc, I would be able to see the doorway into Doc's realm. I followed the bend, and the light grew brighter. I moved cautiously now, putting each foot down with silent care. It was very quiet. For a moment, I wondered if I was wrong and there was no one here at all. Then, as the uneven entrance came into view, throwing a block of white sunlight against the opposite wall, I could hear the sound of quiet sobbing. I tiptoed right to the edge of the gap and paused, listening. The sobbing continued. Another sound, a soft, rhythmic thudding, kept time with it. â€Å"There, there.† It was Jeb's voice, thick with some emotion. â€Å"‘S okay. ‘S okay, Doc. Don't take it so hard.† Hushed footsteps, more than one set, were moving around the room. Fabric rustling. A brushing sound. It reminded me of the sounds of cleaning. There was a smell that didn't belong here. Strange†¦ not quite metallic, but not quite anything else, either. The smell was not familiar-I was sure I had never smelled it before-and yet I had an odd feeling that it should be familiar to me. I was afraid to move around the corner. What's the worst they will do to us? Mel pointed out. Make us leave? You're right. Things had definitely changed if that was the worst I could fear from the humans now. I took a deep breath-noticing again that strange, wrong smell-and eased around the rocky edge into the hospital. No one noticed me. Doc was kneeling on the floor, his face buried in his hands, his shoulders heaving. Jeb leaned over him, patting his back. Jared and Kyle were laying a crude stretcher beside one of the cots in the middle of the room. Jared's face was hard-the mask had come back while he was away. The cots were not empty, as they usually were. Something, hidden under dark green blankets, filled the length of both of them. Long and irregular, with familiar curves and angles†¦ Doc's homemade table was arranged at the head of these cots, in the brightest spot of sunlight. The table glittered with silver-shiny scalpels and an assortment of antiquated medical tools that I couldn't put a name to. Brighter than these were other silver things. Shimmering segments of silver stretched in twisted, tortured pieces across the table†¦ tiny silver strands plucked and naked and scattered†¦ splatters of silver liquid smeared on the table, the blankets, the walls†¦ The quiet in the room was shattered by my scream. The whole room was shattered. It spun and shook to the sound, whirled around me so that I couldn't find the way out. The walls, the silver-stained walls, rose up to block my escape no matter which way I turned. Someone shouted my name, but I couldn't hear whose voice it was. The screaming was too loud. It hurt my head. The stone wall, oozing silver, slammed into me, and I fell to the floor. Heavy hands held me there. â€Å"Doc, help!† â€Å"What's wrong with her?† â€Å"Is it having a fit?† â€Å"What did she see?† â€Å"Nothing-nothing. The bodies were covered!† That was a lie! The bodies were hideously uncovered, strewn in obscene contortions across the glittering table. Mutilated, dismembered, tortured bodies, ripped into grotesque shreds†¦ I had clearly seen the vestigial feelers still attached to the truncated anterior section of a child. Just a child! A baby! A baby thrown haphazardly in maimed pieces across the table smeared with its own blood†¦ My stomach rolled like the walls were rolling, and acid clawed its way up my throat. â€Å"Wanda? Can you hear me?† â€Å"Is she conscious?† â€Å"I think she's going to throw up.† The last voice was right. Hard hands held my head while the acid in my stomach violently overflowed. â€Å"What do we do, Doc?† â€Å"Hold on to her-don't let her hurt herself.† I coughed and squirmed, trying to escape. My throat cleared. â€Å"Let me go!† I was finally able to choke out. The words were garbled. â€Å"Get away from me! Get away; you're monsters! Torturers!† I shrieked wordlessly again, twisting against the restraining arms. â€Å"Calm down, Wanda! Shh! It's okay!† That was Jared's voice. For once, it didn't matter that it was Jared. â€Å"Monster!† I screamed at him. â€Å"She's hysterical,† Doc told him. â€Å"Hold on.† A sharp, stinging blow whipped across my face. There was a gasp, far away from the immediate chaos. â€Å"What are you doing?† Ian roared. â€Å"It's having a seizure or something, Ian. Doc's trying to bring it around.† My ears were ringing, but not from the slap. It was the smell-the smell of the silver blood dripping down the walls-the smell of the blood of souls. The room writhed around me as though it were alive. The light twisted into strange patterns, curved into the shapes of monsters from my past. A Vulture unfurled its wings†¦ a claw beast swung its heavy pincers toward my face†¦ Doc smiled and reached for me with silver trickling from his fingertips†¦ The room spun once more, slowly, and then went black. Unconsciousness didn't claim me for long. It must have been only seconds later when my head cleared. I was all too lucid; I wished I could stay oblivious longer. I was moving, rocking back and forth, and it was too black to see. Mercifully, the horrible smell had faded. The musty, humid air of the caves was like perfume. The feeling of being carried, being cradled, was familiar. That first week after Kyle had injured me, I'd traveled many places in Ian's arms. â€Å"†¦ thought she'd have guessed what we were up to. Looks like I was wrong,† Jared was murmuring. â€Å"You think that's what happened?† Ian's voice cut hard in the quiet tunnel. â€Å"That she was scared because Doc was trying to take the other souls out? That she was afraid for herself?† Jared didn't answer for a minute. â€Å"You don't?† Ian made a sound in the back of his throat. â€Å"No. I don't. As disgusted as I am that you would bring back more†¦ victims for Doc, bring them back now!-as much as that turns my stomach, that's not what upset her. How can you be so blind? Can't you imagine what that must have looked like to her in there?† â€Å"I know we had the bodies covered before -â€Å" â€Å"The wrong bodies, Jared. Oh, I'm sure Wanda would be upset by a human corpse-she's so gentle; violence and death aren't a part of her normal world. But think what the things on that table must have meant to her.† It took him another moment. â€Å"Oh.† â€Å"Yes. If you or I had walked in on a human vivisection, with torn body parts, with blood splattered on everything, it wouldn't have been as bad for us as it was for her. We'd have seen it all before-even before the invasion, in horror movies, at least. I'd bet she's never been exposed to anything like that in all her lives.† I was getting sick again. His words were bringing it back. The sight. The smell. â€Å"Let me go,† I whispered. â€Å"Put me down.† â€Å"I didn't mean to wake you. I'm sorry.† The last words were fervent, apologizing for more than waking me. â€Å"Let me go.† â€Å"You're not well. I'll take you to your room.† â€Å"No. Put me down now.† â€Å"Wanda -â€Å" â€Å"Now!† I shouted. I shoved against Ian's chest, kicking my legs free at the same time. The ferocity of my struggle surprised him. He lost his hold on me, and I half fell into a crouch on the floor. I sprang up from the crouch running. â€Å"Wanda!† â€Å"Let her go.† â€Å"Don't touch me! Wanda, come back!† It sounded like they were wrestling behind me, but I didn't slow. Of course they were fighting. They were humans. Violence was pleasure to them. I didn't pause when I was back in the light. I sprinted through the big cavern without looking at any of the monsters there. I could feel their eyes on me, and I didn't care. I didn't care where I was going, either. Just somewhere I could be alone. I avoided the tunnels that had people near them, running down the first empty one I could find. It was the eastern tunnel. This was the second time I'd sprinted through this corridor today. Last time in joy, this time in horror. It was hard to remember how I'd felt this afternoon, knowing the raiders were home. Everything was dark and gruesome now, including their return. The very stones seemed evil. This way was the right choice for me, though. No one had any reason to come here, and it was empty. I ran to the farthest end of the tunnel, into the deep night of the empty game room. Could I really have played games with them such a short time ago? Believed the smiles on their faces, not seeing the beasts underneath†¦ I moved forward until I stumbled ankle deep into the oily waters of the dark spring. I backed away, my hand outstretched, searching for a wall. When I found a rough ridge of stone-sharp-edged beneath my fingers-I turned into the depression behind the protrusion and curled myself into a tight ball on the ground there. It wasn't what we thought. Doc wasn't hurting anyone on purpose; he was just trying to save – GET OUT OF MY HEAD! I shrieked. As I thrust her away from me-gagged her so that I wouldn't have to bear her justifications-I realized how weak she'd grown in all these months of friendliness. How much I'd been allowing. Encouraging. It was almost too easy to silence her. As easy as it should have been from the beginning. It was only me now. Just me, and the pain and the horror that I would never escape. I would never not have that image in my head again. I would never be free of it. It was forever a part of me. I didn't know how to mourn here. I could not mourn in human ways for these lost souls whose names I would never know. For the broken child on the table. I had never had to mourn on the Origin. I didn't know how it was done there, in the truest home of my kind. So I settled for the way of the Bats. It seemed appropriate, here where it was as black as being blind. The Bats mourned with silence-not singing for weeks on end until the pain of the nothingness left behind by the lack of music was worse than the pain of losing a soul. I'd known loss there. A friend, killed in a freak accident, a falling tree in the night, found too late to save him from the crushed body of his host. Spiraling†¦ Upward†¦ Harmony; those were the words that would have held his name in this language. Not exact, but close enough. There had been no horror in his death, only grief. An accident. The bubbling stream was too discordant to remind me of our songs. I could grieve beside its harmony-free clatter. I wrapped my arms tightly around my shoulders and mourned for the child and the other soul who had died with it. My siblings. My family. If I had found a way free of this place, if I had warned the Seekers, their remains would not be so casually mangled and mixed together in that blood-steeped room. I wanted to cry, to keen in misery. But that was the human way. So I locked my lips and hunched in the darkness, holding the pain inside. My silence, my mourning, was stolen from me. It took them a few hours. I heard them looking, heard their voices echo and warp in the long tubes of air. They were calling for me, expecting an answer. When they received no answer, they brought lights. Not the dim blue lanterns that might never have revealed my hiding place here, buried under all this blackness, but the sharp yellow lances of flashlights. They swept back and forth, pendulums of light. Even with the flashlights, they didn't find me until the third search of the room. Why couldn't they leave me alone? When the flashlight's beam finally disinterred me, there was a gasp of relief. â€Å"I found her! Tell the others to get back inside! She's in here after all!† I knew the voice, but I didn't put a name to it. Just another monster. â€Å"Wanda? Wanda? Are you all right?† I didn't raise my head or open my eyes. I was in mourning. â€Å"Where's Ian?† â€Å"Should we get Jamie, do you think?† â€Å"He shouldn't be on that leg.† Jamie. I shuddered at his name. My Jamie. He was a monster, too. He was just like the rest of them. My Jamie. It was a physical pain to think of him. â€Å"Where is she?† â€Å"Over here, Jared. She's not†¦ responding.† â€Å"We didn't touch her.† â€Å"Here, give me the light,† Jared said. â€Å"Now, the rest of you, get out of here. Emergency over. Give her some air, okay?† There was a shuffling noise that didn't travel far. â€Å"Seriously, people. You're not helping. Leave. All the way out.† The shuffling was slow at first, but then became more productive. I could hear many footsteps fading away in the room and then disappearing out of it. Jared waited until it was silent again. â€Å"Okay, Wanda, it's just you and me.† He waited for some kind of answer. â€Å"Look, I guess that must have been pretty†¦ bad. We never wanted you to see that. I'm sorry.† Sorry? Geoffrey'd said it was Jared's idea. He wanted to cut me out, slice me into little pieces, fling my blood on the wall. He'd slowly mangle a million of me if he could find a way to keep his favorite monster alive with him. Slash us all to slivers. He was quiet for a long time, still waiting for me to react. â€Å"You look like you want to be alone. That's okay. I can keep them away, if that's what you want.† I didn't move. Something touched my shoulder. I cringed away from it, into the sharp stones. â€Å"Sorry,† he muttered. I heard him stand, and the light-red behind my closed eyes-began to fade as he walked away. He met someone in the mouth of the cave. â€Å"Where is she?† â€Å"She wants to be alone. Let her be.† â€Å"Don't get in my way again, Howe.† â€Å"Do you think she wants comfort from you? From a human?† â€Å"I wasn't party to this -â€Å" Jared answered in a lower voice, but I could still hear the echoes. â€Å"Not this time. You're one of us, Ian. Her enemy. Did you hear what she said in there? She was screaming monsters. That's how she sees us now. She doesn't want your comfort.† â€Å"Give me the light.† They didn't speak again. A minute passed, and I heard one set of slow footsteps moving around the edge of the room. Eventually, the light swept across me, turning my lids red again. I huddled myself more tightly together, expecting him to touch me. There was a quiet sigh, and then the sound of him sitting on the stone, not as close beside me as I would have expected. With a click, the light disappeared. I waited in the silence for a long time for him to speak, but he was just as silent as I was. Finally, I stopped waiting and returned to my mourning. Ian did not interrupt. I sat in the blackness of the big hole in the ground and grieved for lost souls with a human at my side.

Recession in India Essay

We have compiled the said report which helps in understanding what corrective steps were taken which helped the banks to emerge out of the turmoil. Financial Crisis The financial crisis of 2007 to the present is a crisis triggered by a liquidity shortfall in the United States banking system caused by the overvaluation of assets. It has resulted in the collapse of large financial institutions, the bailout of banks by national governments and downturns in stock markets around the world. In many areas, the housing market has also suffered, resulting in numerous evictions, foreclosures and prolonged vacancies. It is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s. It contributed to the failure of key businesses, declines in consumer wealth estimated in the trillions of U. S. dollars, substantial financial commitments incurred by governments, and a significant decline in economic activity. Many causes have been suggested, with varying weight assigned by experts. Both market-based and regulatory solutions have been implemented or are under consideration, while significant risks remain for the world economy over the 2010–2011 periods. The collapse of a global housing bubble, which peaked in the U. S. in 2006, caused the values of securities tied to real estate pricing to plummet thereafter, damaging financial institutions globally. Questions regarding bank solvency, declines in credit availability, and damaged investor confidence had an impact on global stock markets, where securities suffered large losses during late 2008 and early 2009. Economies worldwide slowed during this period as credit tightened and international trade declined. Critics argued that credit rating agencies and investors failed to accurately price the risk involved with mortgage-related financial products, and that governments did not adjust their regulatory practices to address 21st century financial markets. Governments and central banks responded with unprecedented fiscal stimulus, monetary policy expansion, and institutional bailouts. | Background and causes The immediate cause or trigger of the crisis was the bursting of the United States housing bubble which peaked in approximately 2005–2006. Already-rising default rates on â€Å"subprime† and adjustable rate mortgages (ARM) began to increase quickly thereafter. An increase in loan packaging, marketing and incentives such as easy initial terms and a long-term trend of rising housing prices had encouraged borrowers to assume difficult mortgages in the belief they would be able to quickly refinance at more favorable terms. However, once interest rates began to rise and housing prices started to drop moderately in 2006–2007 in many parts of the U. S. , refinancing became more difficult. Defaults and foreclosure activity increased dramatically as easy initial terms expired, home prices failed to go up as anticipated, and ARM interest rates reset higher. Share in GDP of U. S. financial sector since 1860 Low interest rates and large inflows of foreign funds created easy credit conditions for a number of years prior to the crisis, fueling a housing construction boom and encouraging debt-financed consumption. The combination of easy credit and money inflow contributed to the United States housing bubble. Loans of various types (e. g. mortgage, credit card, and auto) were easy to obtain and consumers assumed an unprecedented debt load. As part of the housing and credit booms, the number of financial agreements called mortgage-backed securities (MBS) and collateralized debt obligations (CDO), which derived their value from mortgage payments and housing prices, greatly increased. Such financial innovation enabled institutions and investors around the world to invest in the U. S. housing market. As housing prices declined, major global financial institutions that had borrowed and invested heavily in subprime MBS reported significant losses. Falling prices also resulted in homes worth less than the mortgage loan, providing a financial incentive to enter foreclosure. The ongoing foreclosure epidemic that began in late 2006 in the U. S. continues to drain wealth from consumers and erodes the financial strength of banking institutions. Defaults and losses on other loan types also increased significantly as the crisis expanded from the housing market to other parts of the economy. Total losses are estimated in the trillions of U. S. dollars globally. While the housing and credit bubbles built, a series of factors caused the financial system to both expand and become increasingly fragile, a process called financialization. Policymakers did not recognize the increasingly important role played by financial institutions such as investment banks and hedge funds, also known as the shadow banking system. Some experts believe these institutions had become as important as commercial (depository) banks in providing credit to the U. S. economy, but they were not subject to the same regulations. These institutions as well as certain regulated banks had also assumed significant debt burdens while providing the loans described above and did not have a financial cushion sufficient to absorb large loan defaults or MBS losses. These losses impacted the ability of financial institutions to lend, slowing economic activity. Concerns regarding the stability of key financial institutions drove central banks to provide funds to encourage lending and restore faith in the commercial paper markets, which are integral to funding business operations. Governments also bailed out key financial institutions and implemented economic stimulus programs, assuming significant additional financial commitments. The crises culminated on Sept. 15th 2008 with Lehman Brothers filing for bankruptcy. It has been reported that JP Morgan helped drive Lehman into bankruptcy and kicked off the credit crises by forcing it to give up billions in cash reserves on the afternoon of Friday September 13, 2008. Growth of the housing bubble Main article: United States housing bubble A graph showing the median and average sales prices of new homes sold in the United States between 1963 and 2008 (not adjusted for inflation) Between 1997 and 2006, the price of the typical American house increased by 124%. During the two decades ending in 2001, the national median home price ranged from 2. 9 to 3. 1 times median household income. This ratio rose to 4. 0 in 2004, and 4. 6 in 2006. This housing bubble resulted in quite a few homeowners refinancing their homes at lower interest rates, or financing consumer spending by taking out second mortgages secured by the price appreciation. In a Peabody Award winning program, NPR correspondents argued that a â€Å"Giant Pool of Money† (represented by $70 trillion in worldwide fixed income investments) sought higher yields than those offered by U. S. Treasury bonds early in the decade. Further, this pool of money had roughly doubled in size from 2000 to 2007, yet the supply of relatively safe, income generating investments had not grown as fast. Investment banks on Wall Street answered this demand with the MBS and CDO, which were assigned safe ratings by the credit rating agencies. In effect, Wall Street connected this pool of money to the mortgage market in the U. S. , with enormous fees accruing to those throughout the mortgage supply chain, from the mortgage broker selling the loans, to small banks that funded the brokers, to the giant investment banks behind them. By approximately 2003, the supply of mortgages originated at traditional lending standards had been exhausted. However, continued strong demand for MBS and CDO began to drive down lending standards, as long as mortgages could still be sold along the supply chain. Eventually, this speculative bubble proved unsustainable. The CDO in particular enabled financial institutions to obtain investor funds to finance subprime and other lending, extending or increasing the housing bubble and generating large fees. A CDO essentially places cash payments from multiple mortgages or other debt obligations into a single pool, from which the cash is allocated to specific securities in a priority sequence. Those securities obtaining cash first received investment-grade ratings from rating agencies. Lower priority securities received cash thereafter, with lower credit ratings but theoretically a higher rate of return on the amount invested. By September 2008, average U. S. housing prices had declined by over 20% from their mid-2006 peak. As prices declined, borrowers with adjustable-rate mortgages could not refinance to avoid the higher payments associated with rising interest rates and began to default. During 2007, lenders began foreclosure proceedings on nearly 1. 3 million properties, a 79% increase over 2006. This increased to 2. 3 million in 2008, an 81% increase vs. 2007. By August 2008, 9. 2% of all U. S. mortgages outstanding were either delinquent or in foreclosure. By September 2009, this had risen to 14. 4%. Easy credit conditions Lower interest rates encourage borrowing. From 2000 to 2003, the Federal Reserve lowered the federal funds rate target from 6. 5% to 1. 0%. [31] This was done to soften the effects of the collapse of the dot-com bubble and of the September 2001 terrorist attacks, and to combat the perceived risk of deflation. [32] U. S. current account or trade deficit Additional downward pressure on interest rates was created by the USA’s high and rising current account (trade) deficit, which peaked along with the housing bubble in 2006. Ben Bernanke explained how trade deficits required the U. S. to borrow money from abroad, which bid up bond prices and lowered interest rates. Bernanke explained that between 1996 and 2004, the USA current account deficit increased by $650 billion, from 1. 5% to 5. 8% of GDP. Financing these deficits required the USA to borrow large sums from abroad, much of it from countries running trade surpluses, mainly the emerging economies in Asia and oil-exporting nations. The balance of payments identity requires that a country (such as the USA) running a current account deficit also have a capital account (investment) surplus of the same amount. Hence large and growing amounts of foreign funds (capital) flowed into the USA to finance its imports. This created demand for various types of financial assets, raising the prices of those assets while lowering interest rates. Foreign investors had these funds to lend, either because they had very high personal savings rates (as high as 40% in China), or because of high oil prices. Bernanke referred to this as a â€Å"saving glut. † A â€Å"flood† of funds (capital or liquidity) reached the USA financial markets. Foreign governments supplied funds by purchasing USA Treasury bonds and thus avoided much of the direct impact of the crisis. USA households, on the other hand, used funds borrowed from foreigners to finance consumption or to bid up the prices of housing and financial assets. Financial institutions invested foreign funds in mortgage-backed securities. The Fed then raised the Fed funds rate significantly between July 2004 and July 2006. This contributed to an increase in 1-year and 5-year adjustable-rate mortgage (ARM) rates, making ARM interest rate resets more expensive for homeowners. This may have also contributed to the deflating of the housing bubble, as asset prices generally move inversely to interest rates and it became riskier to speculate in housing. USA housing and financial assets dramatically declined in value after the housing bubble burst. Sub-prime lending U. S. subprime lending expanded dramatically 2004-2006 The term subprime refers to the credit quality of particular borrowers, who have weakened credit histories and a greater risk of loan default than prime borrowers. The value of U. S. subprime mortgages was estimated at $1. 3 trillion as of March 2007, with over 7. 5 million first-lien subprime mortgages outstanding. In addition to easy credit conditions, there is evidence that both government and competitive pressures contributed to an increase in the amount of subprime lending during the years preceding the crisis. Major U. S. investment banks and government sponsored enterprises like Fannie Mae played an important role in the expansion of higher-risk lending. Subprime mortgages remained below 10% of all mortgage originations until 2004, when they spiked to nearly 20% and remained there through the 2005-2006 peak of the United States housing bubble. A proximate event to this increase was the April 2004 decision by the U. S. Securities and Exchange Commission (SEC) to relax the net capital rule, which permitted the largest five investment banks to dramatically increase their financial leverage and aggressively expand their issuance of mortgage-backed securities. This applied additional competitive pressure to Fannie Mae and Freddie Mac, which further expanded their riskier lending. Subprime mortgage payment delinquency rates remained in the 10-15% range from 1998 to 2006, then began to increase rapidly, rising to 25% by early 2008. Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people†¦ In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980s. A 2000 United States Department of the Treasury study of lending trends for 305 cities from 1993 to 1998 showed that $467 billion of mortgage credit poured out of Community Reinvestment Act (CRA)-covered lenders into low and mid level income borrowers and neighborhoods. Nevertheless, only 25% of all sub-prime lending occurred at CRA-covered institutions, and a full 50% of sub-prime loans originated at institutions exempt from CRA. While the number of CRA sub-prime loans originated were less than non-CRA sub-prime loans originated, it is important to note that the CRA sub-prime loans were the more â€Å"vulnerable during the downturn, to the detriment of both borrowers and lenders. For example, lending done under Community Reinvestment Act criteria, according to a quarterly report in October of 2008, constituted only 7 percent of the total mortgage lending by the Bank of America, but constituted 29 percent of its losses on mortgages. Economist Paul Krugman argued in January 2010 that the simultaneous growth of the residential and commercial real estate pricing bubbles undermines the case made by those who argue that Fannie Mae, Freddie Mac, CRA or predatory lending were primary causes of the crisis. In other words, bubbles in both markets developed even though only the residential market was affected by these potential causes. Predatory lending Predatory lending refers to the practice of unscrupulous lenders, to enter into â€Å"unsafe† or â€Å"unsound† secured loans for inappropriate purposes. A classic bait-and-switch method was used by Countrywide, advertising low interest rates for home refinancing. Such loans were written into extensively detailed contracts, and swapped for more expensive loan products on the day of closing. Whereas the advertisement might state that 1% or 1. 5% interest would be charged, the consumer would be put into an adjustable rate mortgage (ARM) in which the interest charged would be greater than the amount of interest paid. This created negative amortization, which the credit consumer might not notice until long after the loan transaction had been consummated. Countrywide, sued by California Attorney General Jerry Brown for â€Å"Unfair Business Practices† and â€Å"False Advertising† was making high cost mortgages â€Å"to homeowners with weak credit, adjustable rate mortgages (ARMs) that allowed homeowners to make interest-only payments. â€Å". When housing prices decreased, homeowners in ARMs then had little incentive to pay their monthly payments, since their home equity had disappeared. This caused Countrywide’s financial condition to deteriorate, ultimately resulting in a decision by the Office of Thrift Supervision to seize the lender. Former employees from Ameriquest, which was United States’s leading wholesale lender,[60] described a system in which they were pushed to falsify mortgage documents and then sell the mortgages to Wall Street banks eager to make fast profits. [60] There is growing evidence that such mortgage frauds may be a cause of the crisis. [60] Deregulation Further information: Government policies and the subprime mortgage crisis Critics have argued that the regulatory framework did not keep pace with financial innovation, such as the increasing importance of the shadow banking system, derivatives and off-balance sheet financing. In other cases, laws were changed or enforcement weakened in parts of the financial system. Key examples include: * Jimmy Carter’s Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) phased out a number of restrictions on banks’ financial practices, broadened their lending powers, and raised the deposit insurance limit from $40,000 to $100,000 (raising the problem of moral hazard). Banks rushed into real estate lending, speculative lending, and other ventures just as the economy soured. * In October 1982, U. S. President Ronald Reagan signed into Law the Garn–St. Germain Depository Institutions Act, which provided for adjustable-rate mortgage loans, began the process of banking deregulation, and contributed to the savings and loan crisis of the late 1980s/early 1990s. * In November 1999, U. S. President Bill Clinton signed into Law the Gramm-Leach-Bliley Act, which repealed part of the Glass-Steagall Act of 1933. This repeal has been criticized for reducing the separation between commercial banks (which traditionally had a conservative culture) and investment banks (which had a more risk-taking culture). In 2004, the U. S. Securities and Exchange Commission relaxed the net capital rule, which enabled investment banks to substantially increase the level of debt they were taking on, fueling the growth in mortgage-backed securities supporting subprime mortgages. The SEC has conceded that self-regulation of investment banks contributed to the crisis. * Financial institutions in the shadow banking system are not subject to the same regulation as d epository banks, allowing them to assume additional debt obligations relative to their financial cushion or capital base. This was the case despite the Long-Term Capital Management debacle in 1998, where a highly-leveraged shadow institution failed with systemic implications. * Regulators and accounting standard-setters allowed depository banks such as Citigroup to move significant amounts of assets and liabilities off-balance sheet into complex legal entities called structured investment vehicles, masking the weakness of the capital base of the firm or degree of leverage or risk taken. One news agency estimated that the top four U. S. banks will have to return between $500 billion and $1 trillion to their balance sheets during 2009. This increased uncertainty during the crisis regarding the financial position of the major banks. Off-balance sheet entities were also used by Enron as part of the scandal that brought down that company in 2001. * As early as 1997, Federal Reserve Chairman Alan Greenspan fought to keep the derivatives market unregulated. With the advice of the President’s Working Group on Financial Markets, the U. S. Congress and President allowed the self-regulation of the over-the-counter derivatives market when they enacted the Commodity Futures Modernization Act of 2000. Derivatives such as credit default swaps (CDS) can be used to hedge or speculate against particular credit risks. The volume of CDS outstanding increased 100-fold from 1998 to 2008, with estimates of the debt covered by CDS contracts, as of November 2008, ranging from US$33 to $47 trillion. Total over-the-counter (OTC) derivative notional value rose to $683 trillion by June 2008. Warren Buffett famously referred to derivatives as â€Å"financial weapons of mass destruction† in early 2003. Increased debt burden or over-leveraging Leverage ratios of investment banks increased significantly 2003-2007 U. S. households and financial institutions became increasingly indebted or overleveraged during the years preceding the crisis. This increased their vulnerability to the collapse of the housing bubble and worsened the ensuing economic downturn. Key statistics include: * Free cash used by consumers from home equity extraction doubled from $627 billion in 2001 to $1,428 billion in 2005 as the housing bubble built, a total of nearly $5 trillion dollars over the period, contributing to economic growth worldwide. U. S. home mortgage debt relative to GDP increased from an average of 46% during the 1990s to 73% during 2008, reaching $10. 5 trillion. * USA household debt as a percentage of annual disposable personal income was 127% at the end of 2007, versus 77% in 1990. * In 1981, U. S. rivate debt was 123% of GDP; by the third quarter of 2008, it was 290%. * From 2004-07, the top five U. S. investment banks each significantly increased their financial leverage (see diagram), which increased their vulnerability to a financial shock. These five institutions reported over $4. 1 trillion in debt for fiscal year 2007, about 30% of USA nominal GDP for 2007. Lehman Brothers was liquidated, Bear Stearns and Merrill Lynch were sold at fir e-sale prices, and Goldman Sachs and Morgan Stanley became commercial banks, subjecting themselves to more stringent regulation. With the exception of Lehman, these companies required or received government support. * Fannie Mae and Freddie Mac, two U. S. Government sponsored enterprises, owned or guaranteed nearly $5 trillion in mortgage obligations at the time they were placed into conservatorship by the U. S. government in September 2008. These seven entities were highly leveraged and had $9 trillion in debt or guarantee obligations, an enormous concentration of risk; yet they were not subject to the same regulation as depository banks. Boom and collapse of the shadow banking system In a June 2008 speech, President and CEO of the New York Federal Reserve Bank Timothy Geithner  Ã¢â‚¬â€ who in 2009 became Secretary of the United States Treasury  Ã¢â‚¬â€ placed significant blame for the freezing of credit markets on a â€Å"run† on the entities in the â€Å"parallel† banking system, also called the shadow banking system. These entities became critical to the credit markets underpinning the financial system, but were not subject to the same regulatory controls. Further, these entities were vulnerable because of maturity mismatch, meaning that they borrowed short-term in liquid markets to purchase long-term, illiquid and risky assets. This meant that disruptions in credit markets would make them subject to rapid deleveraging, selling their long-term assets at depressed prices. He described the significance of these entities: In early 2007, asset-backed commercial paper conduits, in structured investment vehicles, in auction-rate preferred securities, tender option bonds and variable rate demand notes, had a combined asset size of roughly $2. trillion. Assets financed overnight in triparty repo grew to $2. 5 trillion. Assets held in hedge funds grew to roughly $1. 8 trillion. The combined balance sheets of the then five major investment banks totaled $4 trillion. In comparison, the total assets of the top five bank holding companies in the United States at that point were just over $6 trillion, and total assets of the entire banking system we re about $10 trillion. The combined effect of these factors was a financial system vulnerable to self-reinforcing asset price and credit cycles. Paul Krugman, laureate of the Nobel Prize in Economics, described the run on the shadow banking system as the â€Å"core of what happened† to cause the crisis. He referred to this lack of controls as â€Å"malign neglect† and argued that regulation should have been imposed on all banking-like activity. Financial markets impacts Impacts on financial institutions 2007 bank run on Northern Rock, a UK bank The International Monetary Fund estimated that large U. S. and European banks lost more than $1 trillion on toxic assets and from bad loans from January 2007 to September 2009. These losses are expected to top $2. 8 trillion from 2007-10. U. S. banks losses were forecast to hit $1 trillion and European bank losses will reach $1. 6 trillion. The IMF estimated that U. S. banks were about 60 percent through their losses, but British and eurozone banks only 40 percent. One of the first victims was Northern Rock, a medium-sized British bank. The highly leveraged nature of its business led the bank to request security from the Bank of England. This in turn led to investor panic and a bank run in mid-September 2007. Calls by Liberal Democrat Shadow Chancellor Vince Cable to nationalise the institution were initially ignored; in February 2008, however, the British government (having failed to find a private sector buyer) relented, and the bank was taken into public hands. Northern Rock’s problems proved to be an early indication of the troubles that would soon befall other banks and financial institutions. Initially the companies affected were those directly involved in home construction and mortgage lending such as Northern Rock and Countrywide Financial, as they could no longer obtain financing through the credit markets. Over 100 mortgage lenders went bankrupt during 2007 and 2008. Concerns that investment bank Bear Stearns would collapse in March 2008 resulted in its fire-sale to JP Morgan Chase. The crisis hit its peak in September and October 2008. Several major institutions either failed, were acquired under duress, or were subject to government takeover. These included Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, Washington Mutual, Wachovia, and AIG. Credit markets and the shadow banking system TED spread and components during 2008 During September 2008, the crisis hit its most critical stage. There was the equivalent of a bank run on the money market mutual funds, which frequently invest in commercial paper issued by corporations to fund their operations and payrolls. Withdrawals from money markets were $144. 5 billion during one week, versus $7. 1 billion the week prior. This interrupted the ability of corporations to rollover (replace) their short-term debt. The U. S. government responded by extending insurance for money market accounts analogous to bank deposit insurance via a temporary guarantee and with Federal Reserve programs to purchase commercial paper. The TED spread, an indicator of perceived credit risk in the general economy, spiked up in July 2007, remained volatile for a year, then spiked even higher in September 2008, reaching a record 4. 65% on October 10, 2008. In a dramatic meeting on September 18, 2008, Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke met with key legislators to propose a $700 billion emergency bailout. Bernanke reportedly told them: â€Å"If we don’t do this, we may not have an economy on Monday. † The Emergency Economic Stabilization Act, which implemented the Troubled Asset Relief Program (TARP), was signed into law on October 3, 2008. Economist Paul Krugman and U. S. Treasury Secretary Timothy Geithner explain the credit crisis via the implosion of the shadow banking system, which had grown to nearly equal the importance of the traditional commercial banking sector as described above. Without the ability to obtain investor funds in exchange for most types of mortgage-backed securities or asset-backed commercial paper, investment banks and other entities in the shadow banking system could not provide funds to mortgage firms and other corporations. This meant that nearly one-third of the U. S. lending mechanism was frozen and continued to be frozen into June 2009. According to the Brookings Institution, the traditional banking system does not have the capital to close this gap as of June 2009: â€Å"It would take a number of years of strong profits to generate sufficient capital to support that additional lending volume. † The authors also indicate that some forms of securitization are â€Å"likely to vanish forever, having been an artifact of excessively loose credit conditions. While traditional banks have raised their lending standards, it was the collapse of the shadow banking system that is the primary cause of the reduction in funds available for borrowing. Global effects A number of commentators have suggested that if the liquidity crisis continues, there could be an extended recession or worse. The continuing development of the crisis has prompted in some quarters fears of a global economic collapse although the re are now many cautiously optimistic forecasters in addition to some prominent sources who remain negative. The financial crisis is likely to yield the biggest banking shakeout since the savings-and-loan meltdown. Investment bank UBS stated on October 6 that 2008 would see a clear global recession, with recovery unlikely for at least two years. Three days later UBS economists announced that the â€Å"beginning of the end† of the crisis had begun, with the world starting to make the necessary actions to fix the crisis: capital injection by governments; injection made systemically; interest rate cuts to help borrowers. The United Kingdom had started systemic injection, and the world’s central banks were now cutting interest rates. UBS emphasized the United States needed to implement systemic injection. UBS further emphasized that this fixes only the financial crisis, but that in economic terms â€Å"the worst is still to come†. UBS quantified their expected recession durations on October 16: the Eurozone’s would last two quarters, the United States’ would last three quarters, and the United Kingdom’s would last four quarters. The economic crisis in Iceland involved all three of the country’s major banks. Relative to the size of its economy, Iceland’s banking collapse is the largest suffered by any country in economic history. At the end of October UBS revised its outlook downwards: the forthcoming recession would be the worst since the Reagan recession of 1981 and 1982 with negative 2009 growth for the U. S. , Eurozone, UK; very limited recovery in 2010; but not as bad as the Great Depression. The Brookings Institution reported in June 2009 that U. S. consumption accounted for more than a third of the growth in global consumption between 2000 and 2007. â€Å"The US economy has been spending too much and borrowing too much for years and the rest of the world depended on the U. S. consumer as a source of global demand. With a recession in the U. S. and the increased savings rate of U. S. consumers, declines in growth elsewhere have been dramatic. For the first quarter of 2009, the annualized rate of decline in GDP was 14. 4% in Germany, 15. 2% in Japan, 7. 4% in the UK, 18% in Latvia, 9. 8% in the Euro area and 21. 5% for Mexico. Some developing countries that had seen strong economic growth saw significan t slowdowns. For example, growth forecasts in Cambodia show a fall from more than 10% in 2007 to close to zero in 2009, and Kenya may achieve only 3-4% growth in 2009, down from 7% in 2007. According to the research by the Overseas Development Institute, reductions in growth can be attributed to falls in trade, commodity prices, investment and remittances sent from migrant workers (which reached a record $251 billion in 2007, but have fallen in many countries since). The has stark implications and has led to a dramatic rise in the number of households living below the poverty line, be it 300,000 in Bangladesh or 230,000 in Ghana. By March 2009, the Arab world had lost $3 trillion due to the crisis. In April 2009, unemployment in the Arab world is said to be a ‘time bomb’. In May 2009, the United Nations reported a drop in foreign investment in Middle-Eastern economies due to a slower rise in demand for oil. In June 2009, the World Bank predicted a tough year for Arab states. In September 2009, Arab banks reported losses of nearly $4 billion since the onset of the global financial crisis. U. S. economic effects Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of approximately 6 percent in the fourth quarter of 2008 and first quarter of 2009, versus activity in the year-ago periods. The U. S. unemployment rate increased to 10. 1% by October 2009, the highest rate since 1983 and roughly twice the pre-crisis rate. The average hours per work week declined to 33, the lowest level since the government began collecting the data in 1964. Effects of Recession on India There is, at least in some quarters, dismay that India has been hit by the crisis. This dismay stems from two arguments. The Indian banking system has had no direct exposure to the sub-prime mortgage assets or to the failed institutions. It has very limited off-balance sheet activities or securitized assets. In fact, our banks continue to remain safe and healthy. So, the enigma is how can India be caught up in a crisis when it has nothing much to do with any of the maladies that are at the core of the crisis. The second reason for dismay is that India’s recent growth has been driven predominantly by domestic consumption and domestic investment. External demand, as measured by merchandize exports, accounts for less than 15 per cent of our GDP. The question then is, even if there is a global downturn, why should India be affected when its dependence on external demand is so limited? The answer to the above frequently-asked questions lies in globalization. First, India’s integration into the world economy over the last decade has been remarkably rapid. Integration into the world implies more than just exports. Going by the common measure of globalization, India’s two-way trade (merchandize exports plus imports), as a proportion of GDP, grew from 21. 2 per cent in 1997-98, the year of the Asian crisis, to 34. 7 per cent in 2007-08. Second, India’s financial integration with the world has been as deep as India’s trade globalization, if not deeper. If we take an expanded measure of globalization, that is the ratio of total external transactions (gross current account flows plus gross capital flows) to GDP, this ratio has more than doubled from 46. 8 per cent in 1997-98 to 117. 4 per cent in 2007-08. Importantly, the Indian corporate sector’s access to external funding has markedly increased in the last five years. Some numbers will help illustrate the point. In the five-year period 2003-08, the share of investment in India’s GDP rose by 11 percentage points. Corporate savings financed roughly half of this, but a significant portion of the balance financing came from external sources. While funds were available domestically, they were expensive relative to foreign funding. On the other hand, in a global market awash with liquidity and on the promise of India’s growth potential, foreign investors were willing to take risks and provide funds at a lower cost. Last year (2007/08), for example, India received capital inflows amounting to over 9 per cent of GDP as against a current account deficit in the balance of payments of just 1. 5 per cent of GDP. These capital flows, in excess of the current account deficit, evidence the importance of external financing and the depth of India’s financial integration. So, the reason India has been hit by the crisis, despite mitigating factors, is clearly India’s rapid and growing integration into the global economy. The contagion of the crisis has spread to India through all the channels – the financial channel, the real channel, and importantly, as happens in all financial crises, the confidence channel. India’s financial markets – equity markets, money markets, forex markets and credit markets – had all come under pressure from a number of directions. First, as a consequence of the global liquidity squeeze, Indian banks and corporates found their overseas financing drying up, forcing corporates to shift their credit demand to the domestic banking sector. Also, in their frantic search for substitute financing, corporates withdrew their investments from domestic money market mutual funds putting redemption pressure on the mutual funds and down the line on non-banking financial companies (NBFCs) where the MFs had invested a significant portion of their funds. This substitution of overseas financing by domestic financing brought both money markets and credit markets under pressure. Second, the forex market came under pressure because of reversal of capital flows as part of the global deleveraging process. Simultaneously, corporates were converting the funds raised locally into foreign currency to meet their external obligations. Both these factors put downward pressure on the rupee. Third, the Reserve Bank’s intervention in the forex market to manage the volatility in the rupee further added to liquidity tightening. The transmission of the global cues to the domestic economy has been quite straight forward – through the slump in demand for exports. The United States, European Union and the Middle East, which account for three quarters of India’s goods and services trade are in a synchronized down turn. Service export growth is also likely to slow in the near term as the recession deepens and financial services firms – traditionally large users of outsourcing services – are restructured. Remittances from migrant workers too are likely to slow as the Middle East adjusts to lower crude prices and advanced economies go into a recession. Beyond the financial and real channels of transmission as above, the crisis also spread through the confidence channel. In sharp contrast to global financial markets, which went into a seizure on account of a crisis of confidence, Indian financial markets continued to function in an orderly manner. Nevertheless, the tightened global liquidity situation in the period immediately following the Lehman failure in mid-September 2008, coming as it did on top of a turn in the credit cycle, increased the risk aversion of the financial system and made banks cautious about lending. The purport of the above explanation is to show how, despite not being part of the financial sector problem, India has been affected by the crisis through the pernicious feedback loops between external shocks and domestic vulnerabilities by way of the financial, real and confidence channels. Effect on Banks The actual effect of recession was only realised in February 2008 in Banking Industry. Before this there were lot of questions and queries regarding whether the U. S. recession will have any impact on India or Indian banking sector. In Feb 2008, the markets suddenly crashed the actual picture came in front. The effects which came across the banking sector are as follow * Credit Card and loan settlements. As soon as the impact of recession was realized by the banking sector, the Indian banking system came into the mode of consolidation. Each and every bank started reviewing their NPA’s and the amount of lending they have done which is yet to be recovered. Bank concentrated more on retail loans and Credit Card payments. The first priority for bank was to recover such amount which was unpaid from their customers. The banks hired external agencies for calling up clients and requesting them to settle their respective dues. This in turn created a panic in the customers mind. The banks in order to recover their dues and make the process fast provided attractive offers to its customers. For e. g. By settling the entire amount by cash there were discounts which were given amounting to about 5% of the entire due amount. * Call money market. In the initial stages of recession there was lot of demand for short term cash amongst the bank as the bank needed to fulfil the requirement of CRR and SLR. The money which was lended by the bank were taking time to recover and therefore there was a sudden requirement of short term money. The interest rate which were use to be at 5-6% grow up to 14-15% for a time period of 11-15 days. These requirements by few banks were enchased fully by other banks which were low on lending. The banks like ING Vysya bank, Yes Bank, IDBI Bank were amongst the few who were lending through call money market to other banks. * Fixed Deposit Rates Before recession hit the market FD rates were at a sky high level. Lot of private sector banks as well as public sector banks were offering interest rates in long term period upto 11-12%. When the recession kicked in the money demand for long term had almost finished. This was because of the reason that banks were in the mode of consolidation and did not want to lend further till the time most of the money was recovered. The bank deposit rates came down to a level of 6-7% as there was ample liquidity in the banking sector because of funds being not given ahead as loans. * Private banks became unpopular. During recession looking at the bankruptcy of foreign banks there was panic in the mind of investors even in india. There were lot of question that were raised whether the private sector banks who take exposure in foreign securities are safe in investing or not. During this period only there was a news which came for ICICI Bank. ICICI Bank had taken direct exposures in securities which issued by Lehman Brothers and Merill Lynch. In fact even few of public sector banks had taken similar exposures but since public sector banks were backed up by the government, there was a comfort factor amongst the investors. If we look at what happened with ICICI Bank, the liquidity was ample and it was just a few percentage of exposure that has gone as bad debt but other private marked players like HDFC Bank and Kotak Mahindra Bank encashed on these opportunities and placed their canopies next to each and every branch and ATM of ICICI Bank. There was a lot of panic which was created within the investors and they wanted to park their funds in a safer bank. Many of them shifted to nationalized banks and others were diverted to other private banks. This not only hampered the image of ICICI Bank but also created a bad image of Indian Private Banks. They were much difficulties which were faced by these banks to get additional deposits from investors and even retain theri clients who were shifting toward nationalised banks. * Diversifying and churning of funds. While the recession was impacting the country and the banking system there were informations that were given to the investors that the government insures on Rs. 1 lakh for any particular individual. This was misinterpreted by lot of investors in what they believed was with respect to one particular bank. With these being public diversification started. Each investor to safeguard his/her money started opening many accounts in different banks and keeping the funds equal in all. There was a lot of churning which happened from private sector banks to public sector banks as there were lot of uncertainity about funds being saved in a private sector bank. Investor created portfolios in different nationalised banks because of which private sector banks faced decline in their interest earnings as well as corpus and faced losses. After a while this myth was broken by RBI governor that the government only ensures Rs. lakh in totality no matter how many banks an investor has. * Lending Choked. The banks private sector as well as public sector were uncertain with what more negative impact were forthcoming. This resulted in, banks not at all lending to retail and corporate which were related to infrastructure or real estate. The cycle of churning of funds had suddenly stopped. Many projects which were about to start or were half way completed we re forced to put their projects on hold as no additional funds were being provided. This created commotion in real estate market which resulted in decline of prices. Even on retail side many of the housing loans were rejected which propelled the negativity more. Even for Large Cap companies the banks were demanding additional securities in cash apart from normal tangible assets. Even for processing loans for investors who had excellent credit history, the banks put ahead lot of extra conditions and terms. This further created panic and investors postponed their financial goals and loans were not applied for. After a while many loan divisions of banks were shut down and the employees were shifted to other departments were asked to leave. This even further increased the liquidity with banks. * Banks Investment Primary earning for any bank is through lending. Loans were not being processed and since the banks were uncertain of what more negative impact will come the banks were desperately looking out for other avenues to make money. The most safest option available with banks was to invest in G-Secs (Government of India Securities). Many banks started heavily into govt. Securities and bonds. These securities were traded quite highly at that period. Other sources including were through reverse repo and short term lending to different banks. During this time period much more focus was given to income from wealth management as markets has been corrected and banks insisted on educating the investors to park their funds in the equity market. Though the banks were heavily investing in G-Secs and other bonds it was not enough for their survival. Sooner or later the banks had to lend where they make the maximum profit. * Unemployment During the time of recession many jobs were lost in all the sectors. The similar effect was seen in banking but it was not in totality but few departments specific. The maximum hits were taken by two divisions which suffered most during the recession time. The first being the Wealth management division of banks. Though the feeling was correct that the markets have come down and valuations are excellent, it was very difficult convincing the investors. This resulted in many job losses in wealth management department of all the banks as revenue was expected which was not possible to generate. The next division which suffered was the loan division. The lay off’s happened more as the departments closed down and were not functional at all. Most of the bank had outsourced the servicing part as it was cheaper compared to keeping the existing team operational. Close to 1100 jobs were lost in the matter of 3 months in the entire banking sector. There were lot of apprehensions in the mind of new jonnies and soon working for a retail bank became unpopular. * Nationalised Banks popularity During all these events the only player in banking who were waiting to claw back the market shares were the nationalised bank. There was enough panic in retail investor’s regarding their funds being safe and sound, which the nationalised banks encashed fully. Maximum number of promotional activities and advertisement were given by them in the news paper and new channels. Even the investors responded to them equally and more than willingly because the backing up of the government was more than enough to provide a relief factor. Even in terms of employment, soon the nationalised banks became very popular and the people who were asked to leave from private banks where looking out for safe options to enter again. They were not willing to take any more risk. With this the bank got best of the aggressive talent in cheap prices. What corrective measures were taken? Decrease in CRR and repo rates. RBI again cuts repo rates ; CRR to inject additional liquidity of Rs 20,000 crore January 2, 2009: On a review of current global and domestic macroeconomic situation, the Reserve Bank has decided to take the following further measures: Repo Rate To reduce the repo rate under the liquidity adjustment facility (LAF) by 100 basis points from 6. 5 per cent to 5. 5 per cent with immediate effect. Reverse Repo Rate To reduce the reverse repo rate under the LAF by 100 basis points from 5. 0 per cent to 4. 0 per cent with immediate effect. Cash Reserve Ratio To reduce the cash reserve ratio (CRR) of scheduled banks by 50 basis points from 5. 5 per cent to 5. 0 per cent from the fortnight beginning January 17, 2009. The reduction in the CRR will inject additional liquidity of around Rs. 20,000 crore to the financial system. It is expected that the reduction in the policy interest rates and the CRR will further enable banks to provide credit for productive purposes at appropriate interest rates. The Reserve Bank on its part would continue to maintain a comfortable liquidity position in the system. Background to announcement of present monetary stimulus by RBI: The global financial situation continues to be uncertain. Since the official recognition of recession in the US, the UK, the Euro area and Japan, the downside risks to the global economy have increased. Concomitantly, the policy initiatives in the advanced economies are geared towards managing the recession and defusing potentially deflationary trends. The US has reduced the Federal Funds Rate to 0 – 0. 25 per cent. Several other advanced and emerging economies such as Japan, Canada, Republic of Korea, Hong Kong and China too have reduced their policy rates. India’s financial sector has remained resilient even in the face of global financial turmoil that is so deep and pervasive. Our financial markets continue to function in an orderly manner. India’s growth trajectory has, however, been impacted both by the financial crisis and the follow-on global economic downturn. This impact has turned out to be deeper and wider than earlier anticipated. Concurrently, because of global developments coupled with supply and demand management measures at home, inflation is on the decline. Reflecting these developments, the Reserve Bank has adjusted its policy stance from demand management to arresting the moderation in growth. In particular, the aim of these measures was to augment domestic and forex liquidity and to ensure that credit continues to flow to productive sectors of the economy. Notably, since mid-September 2008, the Reserve Bank has reduced the repo rate under the liquidity adjustment facility (LAF) from 9. 0 per cent to 6. 5 per cent, reduced the reverse repo rate under the LAF from 6. 0 per cent to 5. 0 per cent and the cash reserve ratio from 9. 0 per cent to 5. per cent How it helped? With these measures of RBI there was ample liquidity which was created in the market which forced the bank to lend out to companies as the funds in the banks were lying ideal and making no money for the bank. This actually started the lending process of the banks. * Role of fiscal stimulus package by government. There is a relationship between budget deficits and the hea lth of the economy, but is certainly not a perfect one. There can be massive budget deficits when the economy is doing quite well – the past few years of the United States being a prime example. That being said, government budgets tend to go from surplus to deficit (or existing deficits become larger) as the economy goes sour. This typically happens as follows: 1. The economy goes into recession, costing many workers their jobs, and at the same time causing corporate profits to decline. This causes less income tax revenue to flow to the government, along with less corporate income tax revenue. Occasionally the flow of income to the government will still grow, but at a slower rate than inflation, meaning that flow of tax revenue has fallen in real terms. 2. Because many workers have lost their jobs, there is increased use of government programs, such as unemployment insurance. Government spending rises as more individuals are calling on government services to help them out through tough times. 3. To help push the economy out of recession and to help those who have lost their jobs, governments often create new social programs during times of recession and depression. FDR’s â€Å"New Deal† of the 1930s is a prime example of this. Government spending then rises, not just because of increased use of existing programs, but through the creation of new programs. Because of factors one, the government receives less money from taxpayers, while factors two and three, the government spends more money. Money starts flowing out of the government faster than it comes in, causing the government’s budget to go into deficit. * How it helped? With the government spending more the government securities started declining in performance. As more and more securities were being issued the interest rate on securities started rising which has a direct impact on the gsec return. This again closed one more avenue of investment for banks as they were investing heavily into them instead of lending it out to corporate. This in all diverted the funds of the bank to the needful and thus started the lending process again. Future outlook In India there is evidence of economic activity slowing down. Real GDP growth has moderated in the first half of 2008 / 09. The services sector too, which has been our prime growth engine for the last five years, is slowing, mainly in construction, transport and communication, trade, hotels and restaurants sub-sectors. For the first time in seven years, exports have declined in absolute terms for three months in a row during October-December 2008. Recent data indicate that the demand for bank credit is slackening despite comfortable liquidity in the system. Higher input costs and dampened demand have dented corporate margins while the uncertainty surrounding the crisis has affected business confidence. The index of industrial production has shown negative growth for two recent months and investment demand is decelerating. All these factors suggest that growth moderation may be steeper and more extended than earlier projected. There are also several structural factors that have come to India’s aid. First, notwithstanding the everity and multiplicity of the adverse shocks, India’s financial markets have shown admirable resilience. This is in large part because India’s banking system remains sound, healthy, well capitalized and prudently regulated. Second, our comfortable reserve position provides confidence to overseas investors. Third, since a large majority of Indians do not participate in equity and asset markets, the negative impact of the wealth loss effect that is plaguing the advanced economies should be quite muted. Consequently, consumption demand should hold up well. Fourth, because of India’s mandated priority sector lending, institutional credit for agriculture will be unaffected by the credit squeeze. The farm loan waiver package implemented by the government should further insulate the agriculture sector from the crisis. Finally, over the years, India has built an extensive network of social safety-net programmes, including the flagship rural employment guarantee programme, which should protect the poor and the returning migrant workers from the extreme impact of the global crisis. RBI’s policy stance Going forward, the Reserve Bank’s policy stance will continue to be to maintain comfortable rupee and forex liquidity positions. There are indications that pressures on mutual funds have eased and that NBFCs too are making the necessary adjustments to balance their assets and liabilities. Despite the contraction in export demand, we will be able to manage our balance of payments. It is the Reserve Bank’s expectation that commercial banks will take the signal from the policy rates reduction to adjust their deposit and lending rates in order to keep credit flowing to productive sectors. In particular, the special refinance windows opened by the Reserve Bank for the MSME (micro, small and medium enterprises) sector, housing sector and export sector should see credit flowing to these sectors. Also the SPV set up for extending assistance to NBFCs should enable NBFC lending to pick up steam once again. The government’s fiscal stimulus should be able to supplement these efforts from both supply and demand sides. What Industry experts think? Mentioned below is what the senior experts in banking think of how the banking sector survived the crisis. 1). Mr. Anil Kumar Gupta (Vice President) Wealth management division- North and east region ING VYSYA BANK LTD. â€Å"The banking sector is very strong in India. Especially with the help of a governing body like RBI monitoring all the banks in Indian. † â€Å" I would say that step’s that were taken by the RBI in terms of rate cuts made so much liquidity in banking system that they were compelled to lend out to corporate. The recession gets more dangerous if the spending cycle by the people of the country or the lending cycles by the banks are put on a hold. † 2). Mr. Manavjeet Awasty (Senior Vice President) CITI BANK LTD- North â€Å"The ratio’s that the banks need to maintain because of RBI like CRR and SLR are the life savers for any banking firm. During financial crisis the condition of bankruptcy comes only when liquidity is crunched. The ratio’s which are maintained makes sure that enough liquidity is available in the system. † When the turnaround comes Over the last five years, India clocked an unprecedented 9% growth, driven largely by domestic consumption and investment even as the share of net exports has been rising. This was no accident or happenstance. True, the benign global environment, easy liquidity and low interest rates helped, but at the heart of India’s growth were a growing entrepreneurial spirit, rise in productivity and increasing savings. These fundamental strengths continue to be in place. Nevertheless, the global crisis will dent India’s growth trajectory as investments and exports slow. Clearly, there is a period of painful adjustment ahead of us. However, once the global economy begins to recover, India’s turn around will be sharper and swifter, backed by our strong fundamentals and the untapped growth potential. Meanwhile, the challenge for the government and the RBI is to manage the adjustment with as little pain as possible. Conclusion To conclude, we would say that the Indian banking sector is very strong in terms of its maintaining the said regulations and to follow the rule implied by its governing body which is RBI. The necessary steps were taken during the financial crisis which helped the banking sector to emerge out of the crisis without any major disturbance.

Tuesday, July 30, 2019

Marriot Corporation Essay

2. Is the proposed restructuring consistent with management’s responsibility? 3. The case describes two conceptions of managers’ fiduciary duty (p. 9). Which do you favor: the shareholder conception or the corporate conception? Does your stance make a difference in this case? 4. Should Mr. Marriott recommend the proposed restructuring to the board? Marriott Corporation (A) 1. Why is Marriott’s chief financial officer proposing Project Chariot? What is your assessment of MC’s financial condition? Is this project necessary for the company’s survival?. 2. Is Project Chariot consistent with management’s responsibilities? To bondholders? To shareholders? To the public? 3. The case describes two conceptions of manager’s fiduciary duty. Which do you favor: the shareholder conception or the corporate conception? Does your stance make a difference in this case? 4. Should Mr. Marriott recommend the proposed restructuring to the board? 5. Who will be affected by Project Chariot? Should MC make any concessions to the bondholders? ————————————————————————————————————————————– Ans. 1 Project Chariot involves a conflict of interest between the shareholders and the bondholders since in this case the debt being held by Marriott Corporation (MC) is risky. Project Chariot aims to create MII with low debt and HMC with high debt. Thus bondholders will find that their investment gets tied to risky real estate assets whose appreciation is uncertain. Food management which is a major segment of MC remains with MII. Thus Project Chariot aims to give shareholders the business upside and bondholders the real-estate downside. Hence this appears to be a case of risk shifting. Shareholders stand to gain while bondholders will lose if Project Chariot is implemented. Ans. 2 This seems to be a case of ‘Cashing out’/’Wealth Transfer’ where the ‘overall’ wealth is being transferred from the bond holders to the equity holders. The following points lead us to the direction of it being a ‘wealth  transfer’ type of conflict: * Chariot will result in a loss to bondholders and a gain to shareholders as the bonds will be downgraded by rating agencies and the returns of the bondholders will be attached to a heavily indebted duty * Total Debt will become more risky, and bonds will be downgraded to ‘below investment grade’ level * MC would be divided into two separate companies. MII would do MC’s lodging, food, and facilities management businesses, whereas HMC would retain MC’s real estate holdings and its concessions on toll roads and in airports, Hence bond holders will now have a claim on only the payoffs of HMC and not MII. So, because of the above reasons ‘Project Chariot’ seems like a case of ‘Wealth Transfer’ conflict of interest. Ans. 3 We believe in the broad view of manager responsibility. We think that managers should not only consider the interests of shareholders but also the interests of bondholders, employees, and other related parties. This responsibility is even more important in the case of a B2C company like Marriott. If they get†¦ 1. If the Project Chariot is implemented i.e. Marriott is divided into 2 companies Marriott International(MI) with the risk free profit generating operating hotel and service business while the other Host Marriott(HM) a would own Marriott’s hotel and undeveloped real estate businesses and other non service businesses, this will affect the following players: a) Shareholders: Shareholder now have majority stake in a corporation with a lower probability of default while all the risk is transferred to debt holders. So all the risky investments are highly leveraged with bond holders exposed to the risk. On the other hand MI backed mainly by shareholders equity and performing assets and thus would be able to issue new debt increasing value for both shareholders and the corporation. Thus the shareholders would gain at the expense of bond holders and the equity value of the company would increase. b) Bondholders Bondholders had a lot to lose as according to Project Chariot almost all the debt would be assigned to HM. Given the problems in real estate and hotel markets there was a concern of HM’s ability to meet its debt payment and there was a high probability of default. This meant that the risk was issued at investment grade but now was not backed by valuable assets of the companies which were to be spun off to MI which was to be backed by equity. The value of the bonds would decline substantially and the bond holders would loose a lot of their investment. c) Management(The Mariott brothers) The management gains from the spin off since it is able to split its distressed assets from the profit driving assets and there was a new company which was not under distress thus helping them retain their management positions and start from scratch. They can concentrate on core businesses thus improving efficiency and value. d) The value of the whole company: The spin off does not create value for the company as a whole but only distributes the†¦ What: Under Project Chariot, Marriott Corporation (MC) would become two separate companies. The new company, Marriott International Incorporated (MII), would consist of MC’s lodging, food, and facilities management businesses, as well as the management of its life-care facilities. The existing company, renamed Host Marriott Corporation (HMC), would retain all MC’s real estate holdings and its concessions on toll roads and airports. Why: This project is being proposed because the economic slowdown in the late 1980s and the 1990 real estate market crash left MC owning many newly developed properties for which there were no buyers, together with a massive burden of debt. The new company (MII) would have the financial strength to raise capital in order to take advantage of investment opportunities. The existing company (HMC) would take on the newly developed properties and most of the existing debt. HMC would be valued for the chance of appreciation in the property holdings when the real estate market recovered, not on the basis of earnings, thereby reducing the pressure to sell properties at depressed prices. 2- The fiduciary duty of management is to the shareholders  because they are more than creditors; they are the actual owners of the firm. Management is entrusted with the responsibility to increase shareholder value and their main focus should be on investing in projects that accomplish that task. As stated in the case: â€Å"U.S. courts had held that corporations have no responsibilities to safeguard the interests of bondholders other than those spelled out by the terms of the bond indenture†. 3- I first looked at the initial market reaction; the change resulting from October 2, 1992 (pre-announcement) through October 7, 1992 (post-announcement). I used October 7 for my initial market reaction because in 1992 many people may have still relied on newspapers for investment information. In addition, I assessed this narrow amount of time separately because widening the range of dates used to evaluate the change in prices may allow other variables outside of Project Chariot to come into play. However, I also looked at a wider range of time [October 2, 1992 (pre-announcement) through December 31, 1992]. If you can reasonably assume no extraneous variables affected the prices during this time, widening the range of dates assessed can give an idea of the impact to prices after the initial market over/under-re†¦

Monday, July 29, 2019

Logic Gates Essay Example | Topics and Well Written Essays - 500 words

Logic Gates - Essay Example NAND Gate states that output X is TRUE or 1 if and only if any one of the inputs is FALSE (0) or both are FALSE else it’s TRUE (ITL Education Solutions Limited, 2011). Truth table for X = NOT A AND B is- Boolean algebra can be stated as a mathematical logic or a subarea of algebra. There are certain theorems included in this Boolean algebra that are utilized in solving mathematical operations. The truth values or values for variables used in this algebra are represented as 0 and 1. These numerical figures basically denote False and Truth respectively. In this type of elementary algebra variable values are represented as numbers. The main operations of Boolean algebra are denoted as conjunction, negation and disjunction. It is a formal structure to describe wide set of logical relations. Boolean algebra plays a critical role in structuring modern programming languages. The different laws of Boolean algebra have been given in figure 1. A Boolean function can be defined as a function ‘f’ associated with Cartesian product xn {0, 1} to {0, 1} (Khanna, 2008). An example comprising of Boolean function and Boolean algebra is given

Sunday, July 28, 2019

Planning Document Research Paper Example | Topics and Well Written Essays - 1500 words

Planning Document - Research Paper Example The plans established during project planning stage will aid the manager to save time, resources, quality, challenges, transformations and other issues. Additionally, it helps the manager to manage team, members of staff and outside stakeholders to ensure project timely project deliverance and within schedule. Introduction Experts agree that project-planning stage is mainly the most problematic stage for human resource managers because they need to produce skilled staff, adequate resources and tools required to complete the project. They may also require organizing and communicating the plan, project scope, procurement activities and work breakdown structures for the success of the program. This paper explains my project charter for benefit and compensation package revamping, communication plan, the scope of the project and the work breakdown structure for my compensation and benefit package as a new appointed human resource manager in charge of small teams. Discussion Project Charte r for Project Benefit and Compensation Package Revamping As a new human resource head appointee and now responsible for a small team management, I have a critical role ahead. The next project based on this new task is to revamp the benefit and employee compensation package that workers are receiving at the organization. Workforce benefits and compensation are intensively crucial and significant aspects in the process of new hire approval and workforce retention. Similarly, it is my responsibility to revamp, build and provide a valuable benefit and compensation products, that motivate and retain the most crucial and experienced workforce while making them accepted, proud and approved by the company members. The primary goal and purpose of workforce compensation is to offer effective and equal benefits to workforce at a level, which align their expertise, capabilities and contributions to the organization. Compensation is the role of human resource management, which handles all forms of rewards that people receive for their better performance – such as nonfinancial and economic benefits. My financial benefits plan will entail direct rewards like salary, time off pays, wages, any form of bonus and increases on merit basis as well as other plans for profit sharing. Indirect rewards like workforce benefits, (Armstrong & Cummins, 2011). Additionally, nonfinancial benefits involve anything in workstation, which promotes workforce’s self-esteem and self-respect sense by others. Therefore, as a new human resource manager, I will design packages for compensation and benefits for the entire workforce and perspective new recruits. I will design and implement the team’s expectations to prevent miscommunication concerning employees’ requirements. The project charter will include a policy concerning the number of work hours, overtime, time compensation and time off payments (such as Holidays, emergency leaves and personal holidays). In addition, t he least or base grades of salary will be based on position or title of the job, job description, job qualification and educational qualification will be established to determined workforce salary. A compensation plan is what motivates long-term workforce that is rewarded without evaluating their jobs or establishing an entitlement sense. Therefore, as a new human resource leader, I will have to provide this material to higher management and right stakeholders for the project approval. The aim is to indicate where the dollars that workforce spends on after taxation by

Saturday, July 27, 2019

The Fall of the Berlin Wall Essay Example | Topics and Well Written Essays - 750 words

The Fall of the Berlin Wall - Essay Example Those in charge of the Eastern Bloc felt that this migration would lead to a so-called â€Å"brain drain†, particularly as many of the migrants were young and well-educated . The East also felt that the West, particularly West Germany, was still under fascist influences , and these two fears lead to the feeling that such migration should be stopped and the erection of the Inner German Border, separating the two areas of Germany but allowing traffic to flow freely between the two areas of Berlin, despite the city being occupied by separate powers .  Due to Berlin’s more open nature, there were fears that the emigration to the West would continue. Nikita Khrushchev, the First Secretary of the Communist Party of the Soviet Union at the time, is implicated in making the suggestion that the Berlin Wall be erected and President John F. Kennedy is thought to have implied that no resistance would be made against the erection of such a border . Shortly following this, a deal w as made to finalize the plans, and the border was closed by military officials and barbed wire in the early days of August 1961, with the concrete elements of the wall shortly following. From this date until November 1989, it was nearly impossible to cross between the two areas of Berlin.Wall. The Cold War was a state of political tension between the West (headed by the U.S.) and the East (headed by the Soviet Union) which never showed direct military action but was symbolized by the constant threat of nuclear war.... ration should be stopped and the erection of the Inner German Border, separating the two areas of Germany but allowing traffic to flow freely between the two areas of Berlin, despite the city being occupied by separate powers5. Due to Berlin’s more open nature, there were fears that the emigration to the West would continue. Nikita Khrushchev, the First Secretary of the Communist Party of the Soviet Union at the time, is implicated in making the suggestion that the Berlin Wall be erected and President John F. Kennedy is thought to have implied that no resistance would be made against the erection of such a border6. Shortly following this, a deal was made to finalize the plans, and the border was closed by military officials and barbed wire in the early days of August 1961, with the concrete elements of the wall shortly following. From this date until November 1989, it was nearly impossible to cross between the two areas of Berlin. The End of the Wall and the War The Cold War had a huge part to play in the construction and fall of the Berlin Wall. The Cold War was a state of political tension between the West (headed by the U.S.) and the East (headed by the Soviet Union) which never showed direct military action but was symbolized by the constant threat of nuclear war7. Ronald Reagan was one of the most influential figures of the Cold War and its end, signing an agreement to ban intermediate-range nuclear weapons with the then-Soviet Genera l Secretary Mikhail Gorbachev8. Reagan also challenged Gorbachev to tear down the wall, symbolizing as it did the oppressive regime of the Soviet Union and everything that the President stood against. At the same time, much of the Soviet economies were stagnant and revolutions in Poland and the Baltic States were well underway,

Friday, July 26, 2019

A summary post us even more important in this forum given the range of Coursework

A summary post us even more important in this forum given the range of issues thathave been covered - Coursework Example market and sets high prices than the prices at which the buyers are willing to buy at leading to the restriction of supply quantity and a reduction in the demand of the consumers for the product due to the high prices (Varoufakis, 1998). One example of a monopoly is the government of Saudi Arabia that has total control for supply of oil and the whole oil industry. Other examples include Sky film that has led to increased prices in the pay television business in the UK. Inappropriate competition may result to an oligopoly, which is a form of market failure where a small number of firms dominate the market and decisions by one firms influences that of other firms in the market (Howard et al., 2009). Collusion among the firms leads to setting of higher prices and limiting of supplier affecting the consumers in the market. Examples of oligopolies include Tesco, Sainsbury, Morrisons, and Asda, which have 74.4% of the grocery market and Barclays, HSBC, Lloyds TSB, Natwest, and Halifax, which together dominate the banking sector in the United Kingdom. Inappropriate information may also result to a situation characterized by one buyer influencing the decisions of the suppliers in the market, a situation referred to as a monopsony (Ferguson, 2004). An example of a monopsony in the Natural Led Lumber Media Company where it is the only company conducting lumbering operations in Lumber town. As demonstrated in the above examples of monopoly, oligopoly, and monopsony as cases for inappropriate competition, leading to market failure, which results in the lack of a free market mechanism for allocation of goods and services demonstrated by these conditions in the

Thursday, July 25, 2019

Men in Nursing Essay Example | Topics and Well Written Essays - 1000 words - 1

Men in Nursing - Essay Example Men, have mostly, been curiously invisible, in the history of nursing. General nursing may be viewed as a feminine role also, because specific job tasks involve washing and close physical contact with the patient. Mental health nursing could be viewed, as being more masculine, and therefore the role of the majority of male nurses, as they sometimes have to deal with physical aggression, so have to be physically stronger and remedy disturbances of the patients mind. As nursing is also perceived, as too poorly a paid profession, It could also be a strong likelihood, of why the majority of men are "put off" from pursuing it as a career, especially as society appears to focus on men as the main family wage earners. To encourage people into non-stereotypical employment or training especially in nursing, the environment needs to be one that welcomes the individual and which is readily accessible. The conditions need to be right for that person to feel valued, in an environment where they m ay be in the minority. In order to make this happen, the place of work should be neutralized, in this case new nursing practices could be introduced, changing the image of nursing, firstly the job title of nurse could be changed, to one more suitable to both genders, to perhaps "medics" as known in the states. Developing strategy, focused on members of the multidisciplinary team, in the process of questioning their own attitudes, beliefs and values, aimed at implementing cultural and structural changes. The government, could implement new pay scales inviting more applicants, an attractive salary will certainly steer more people towards nursing as a career. (Meldrum, 2000) In new age men seem to resume their historical role as carers and nurses, like women are now resuming their role as physicians. In twentieth century nursing as a predominately female profession is changing again. American Assembly for Men in Nursing is working to support and promote men in American nursing; this

Scholarly Writing Essay Example | Topics and Well Written Essays - 750 words

Scholarly Writing - Essay Example In science, any decision made has to rely on tested evidence and factual data, for example psychology. As discussed in (â€Å"Psychology as a Science†, 2013), this is because it involves systematic observation, data collection, and data analysis (empiricism), the examination of testable problems, and the falsifiability of result. Information in science should be testable, and people can refer the decision as a fact. A scientific decision goes through different stages such as data collection, data analysis and testing to ensure its authenticity. Scientific decisions only factor in factual data (Pope, 1998). On the other hand, however, common sense does not rely in any form of data or tested information. An individual, basing his or her reasoning on what he believes to be true or as "intuitively obvious" makes a decision about a particular issue. Such a decision lacks any form of data or evidence. Therefore, the decision arrived at could be either true or false. According to (â €Å"Psychology as a Science†, 2013), the problem with common sense ideas about behavior is that much of it is contradictory, leaving one to wonder still about the actual answer to some of life’s questions. Common sense involves critical thinking. According to Douglas (2000), critical thinking puts into consideration the importance of beliefs. Since people find it easier to believe than to disbelieve, critical thinking helps them back their reasoning to believe in any decision they come up with. As discussed in (â€Å"Psychology as a Science†, 2013), a good critical thinker uses scientific inquiry to discover that both cliches in each dichotomy are unsupported, that only one is supported, or that both are actually supported. Personally, critical thinking helps me in believing what I have learnt or read. It is possible to differentiate between something that is true and one that is untrue by critically analyzing a text by use of prior information. Belief persevera nce is the tendency of an individual o hold on to his or her initial belief, even when provided with new information that contradicts the present belief. Paul & Elder (2003) assert that critical thinking involves focusing on the purpose of thinking, questions the thinking is pursuing, the information in use, the assumptions and inferences made, concepts and point of view guiding the thinking and the implications of the thinking. Belief perseverance acts in ignorance with this argument, as here is no way of solving an individual’s decision, despite being acquainted with this knowledge. Personally, I try to use common sense to allow for critical thinking in place of personal belief. With common sense, I know when something is wrong and when right. I cannot interchange these two, to make something right wrong and something wrong right using common sense. References Douglas, N. L. (2000). Enemies of critical thinking: Lessons from social psychology research. Reading Psychology, 2 1(2), 129–144. Paul, R., & Elder, L. (2003). Critical thinking: Teaching students how to study and learn (Part III). Journal of Developmental Education, 26(3), 36-37. Pope, K. S. (1998). Pseudoscience, cross-examination, and scientific evidence in the recovered memory controversy. Psychology, Public Policy, & Law, 4(4), 1160-1181. Psychology as a Science. (2013). [Study notes] Scholarly Writing The author had a good topic of discussion; the personal computer. The author, while introducing the topic, digs a little background