Studying The Pollution In The Banking System Finance Essay - Free Essay Example

Sample details Pages: 11 Words: 3178 Downloads: 8 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? The $100 billion question shows that a several big issues, which are being debate all over the time after a great depression. The pollution in the banking system resulted a lot of serious social cost and the governments are trying to tackling them by different ways. In fact, there is too hard to find perfect solution for this issue. The cost of the banking pollution is the systemic risk, which is often ignoring by the banks and financial institutions. The systemic risk is being ignored because of the natural humanity of the people. People always more concern about the private benefit and the private cost of themselves. The bankers are not the exception. They only see the benefit and the risk inside their banks, and never concern about the systemic risk because if they do so, they will think about what is the benefit for them. Therefore, the governments have to act as the role to sort it out. The banking crisis is the retribution to the banks for generated the bank ing pollution through those products and financial services. But unfortunately, problem had become the social cost and encumbered the innocent public. Nowadays, there are still have some of the people believe that market is always get it right because people usually rely on price and market sort everything out most of the time. They believe that the market is self-correcting, self-policing, and self-regulating. The invisible hand, is means by the self-regulating nature of the marketplace and it is the metaphor coined by the economist, Adam Smith. But, in fact, according to several of the real life market crisis, it seems like it doesnt always get it right. The market is not self-correcting, and we can see this point through the events of banks are not lending money to other banks the other consumers because they scare to take risk after the subprime crisis. The market doesnt get it right when there are externalities, which create the social cost that generated by the impact of an individuals action to the innocent public. Sometimes, in the normal market system, something is affected but is not accounted on and consequently generated the social cost. Therefore, market cannot predict explicitly when disaster will happen in the market. By the reason of the market didnt realise the systemic risk, so they were keep doing that in a wrong way because they dont know it will going to harm the whole system. Therefore, the collective of the systemic risk create the banking bubble and the creator of the precedent might be the mortgage backed securities and the over lending bank. It was a triple A rating security and people feel safe to hold it and enjoyed the return that its paid whereas, the bankers over lending the loan in order to get more profit as they could, but they neglected to set aside of sufficient capital to reserve for the risk management. Hence, people got shock when subprime crisis exploded and most of them unable to survive in the climate change. The go vernment regulatory should be balanced with the free market. The regulator should increase the capital requirement in the bank to overcome the lack of trust existing between the banks in order to achieve a greater balance government regulatory actions and the free market. Furthermore, the government should let the market sort it out by itself. Normally, people prefer the market sort it out by organizing the price system, but if we dont know what the price should be. If there is a small amount of extra pollution, then just dont produce any more than that. The social cost that generated by the banking by the banking pollutant should be mitigated. The government is the one, who responsible to consider the public benefit. Moreover, it plays a vital role in the regulation of banking system and securities that ensure the markets keep moving on. Therefore, government should step in to mitigate the problems that created by the banking system because it is the critical factor that to over come the crisis with the market. There is too much pollution in the market and those pollution is immeasurable. Nowadays, the demand of the people is too much, so the bank took more risk to create more products to fulfil the customer demands and consequently make the banking system become more complicated. So, the intervention of government can stop them to avoid the increase in the systemic risk. But the Basel II, seem to be unuseful, because it set the level for the capital requirement is too low. Due to the lesser capital that set aside in the banks, the bank unable to cover the loss during crisis, because they are totally run out of fund. So, the government bailed out the bank to avoid the whole system break down, because if one of the banks is fail, the others will fail too. There is an interdependent relationship between the banks. If the bank fails, it will cumbrance the other bank too. Now, the Basel III has just came out, it is improved the regulations with the higher capit al requirement, stronger risk management strategic, and so on. The risk in the market is measurable whereas the uncertainty is cannot be measured. The example of the risk in the market is credit risk, liquidity risk, operational risk, and so on. Instead, the uncertainty is bigger, it may be has more serious effect to the market than the risk. For instance, the climate change for the market is uncertainty, because nobody knows when it going to happen and it always result in an enormous cost to the public. The systemic risk is the highly complexity and uncertainty, and it drove most of the crisis. Therefore, governments are struggling to depress the systemic risk in order to reduce the likelihood of the crisis by stopping the banks from taking the risky investment. One important dimension of the debate concerns the social costs of systemic risk. Determining the scale of these social costs provides a measure of the task ahead. It helps calibrate the intervention necessary to tack le systemic risk, whether through regulation or restrictions. (Haldane, 2010:2) Thats means the social cost of systemic risk is very important and the scale of it needs to be measured out because it can helps in the intervention process as a criterion to tackle systemic risk, whether through regulation or restrictions. Normally, it is evaluating by either the fiscal or the foregone output costs of crisis and the past crisis cost is usually larger and permanent. Research by Haldane (2010) concluded that, the losses of the US is less than 1%of the US GDP and for UK, the direct cost may be less than  £20 billion, or a bit more than 1% of GDP. The 1% of GDP is seem to be a tiny part of the GDP, but for the taxpayers, who are paying tax to bail out the banking system, is seem to be an astronomical number because 1% of the UK GDP is almost  £20 billion. They may never get this amount in their life. For US, the losses are currently estimated to be around $100 billion, and that means th e taxpayers had to pay for $100 billion out. The US population is about 300 million, and then each of them has to pay about 333 US Dollar. Actually, the losses of GDP could be lost it forever because of the time value of money. After a few years, the losses of UK GDP divide by discount rate, it might be few hundred billion pound losses. For example, assumes that the GDP after 10 years can be 120% of the current GDP, if the GDP didnt loss, the actual GDP after 10 years will be 130%. So, they are actually lost 10% of GDP. The collapsed of bank led to the collapsed of the GDP because the banks role is to lend money to keep all the things moving on, if the bank collapse, means the lending resources collapse too and consequently the GDP collapse. Subsidy that government paid to banks is the financial assistance to the banks and that is the way how government to secure the banking system stability. How the losses of the banks could reach the amount of $100 billion? That is because the implied government subsidy to the banks didnt counted into the cost of the bail out. For instance, if the government guarantee or protect everybody that lending money to the banks, then the investors will feel safe and that is not risky than they thought. Therefore, they think maybe they shouldnt charge 5% interest to the bank, and go to 4.5% because if the banks fail, the government will pay to them. The indirect subsidy import by government has reduced the cost of borrowing and consequently the banks make more profit because they are borrowing at a lower rate and lending at a higher rate and those profit actually is based on the subsidies. Hence, the actual subsidy should including the indirect subsiding in the evaluation of the fiscal cost. In essence, subsidies have many unintended consequences which can be damaging to the markets environment and social equality. Sometimes, too much of the subsidies are paid, they might create the imbalance in the free market and lead to the mar ket unable to correct by itself. Consequently, the banks are being too relied on the subsidies from government and they are taking more risk for the higher return, because they know that government will cope with the problem when they are trapping in the hot water. Banks shouldnt be over winked and shielded, and the government should set a limit to the subsidies according to the banks size. The credit rating agencies are the proxies to evaluate the rating of the banks that use to refer by the government to decide the amount of subsidies need to inject. In additions, they also provide the support and independent of credit rating to the bank. Nonetheless, the public had doubt about the ability of credit rating agencies after the subprime crisis in US. Investors trusted credit rating agencies to issue accurate and impartial credit ratings, but that trust was broken in the recent financial crisis, according to Levin (2007 cited in Dayen, 2010:online) That is because the mortgage back ed loan that the credit rating agencies rated it as a triple A security was default. The credit rating agencies rated the mortgage backed loan based on the past data and neglected the higher underlying risk of it. The government should intervene in the credit rating to ensure the independent, accuracy of the rating and no frauds exist in the rating process. Research by Haldane (2010) concluded that, the bigger size of bank, the more subsidies are needed and over the past century, the subsidies that supported to bank just like an up-only escalator. The bigger banks have to dealing with the more complicated market that related to the moral hazard, economic specialization, and monetary theory. The complicated banking system consist a lot of underlying risk that the banks cant cope with and they dont even know those existing risk. Hence, the bigger bank, the bigger risks they take. The UK government choose to tax them in order to repair the damage that the banks created during crisis . I dont think merely raising the fees or capital on large institutions or taxing them is enough theyll absorb that, theyll work with that, and its totally inefficient and theyll still be using the savings., according to Greenspan(2009 cited in Wikipedia, 2010:online) Thats mean, levy tax on the banks is not an effective way to the problem because even though their profit is lesser, but they still can taking a higher risk to earn it back by investing more, or they can still using the savings from depositor. It is seems to be insensible, because the banks allowed to invest in the risky investment and if any failure appear, the government will support them through subsidies. In essence, government should cut down the size of the bank, which is considered too big to fail. The issue of Should government tax or prohibit the banks? is being debate hotly in the world. Taxation solution is to ensure the banks making a fair contribution for social cost that they made, which pose the pote ntial risks to the financial system and the economy. Moreover, it can create higher buffer of capital and the liquid asset to ensure the banks able to recover the losses by themselves. If government tax at the price to the bank, then they wont make risky decisions. Nonetheless, as a tradeoff for the holding higher capital and liquidity asset, the banks will reduce their profit and maybe put up the cost of the people, who is trying to borrow money from banks. Whereas, the prohibit solution is the restriction on the banks activities as well as the size of them and the structural reform of banking may take place. Furthermore, the activities of the banks will be separated in order to stop them from doing the activities that may cause the systemic risk. The complex system consist a lot of error and underlying risk. The system is interconnected, it is not about the individual unit, because the individuals mistake wont affect the bank much, but if one of the systems failed, it will affect the overall banking system. The separation of activities is to prevent all the things ruin once. Assumes that the banking system is a forest and the tree in the forest was plant separately, if the fire burn up the forest, it will not burn off the whole forest because of the fire breaks. The fail of the system can be affect by the outside attack or inside attack. For example of the inside attack is the remuneration system in the bank that create a lot of the individual errors. The prohibition can aid the system resilience because the separation of department can simplify the system, and they can fit together, the most important thing is, if one of them destroy, it cant affect the others. Maybe the government can separate all the section in a bank and eat section is manage by different company. Some of them can manage securities transaction, some of them of them can receive the deposits and lend it out and simplify some of the activities to create a robustness financial system. One of the prohibitions benefits is diversify the risks and having diversity. The bank always does diversification and all of the banks diversify the risk exactly the same way because everything in the financial system actually is same. Hence, they do a lot of diversification but they are not diversity. Glass-Steagall Act is a restriction approach that established in year 1933 after the US stock market crisis and repealed in year 1999 because it created the barriers between the commercial bank and the investment bank, and the banks had a lower competitive situation than the foreign banks. The Glass-Steagall Act was over setting the restriction, and caused many people complaint about it. According to the Weitzmans theory, the economy just like environment and he described that the climate change as a disaster of the economy. The climate change in the economy is unpredictable. The factors that create the climate change are also indiscernible. The impact of it would be enormous and wider, the public usually get shocked from it. The pollution that created by the banking system generated the systemic risk and consequently formed the bubble, and the bubble is uncertain because people dont know when it going to explode. Social cost will be increase aftermath of the climate change. Some of the people dont even care about the social cost, they just concern about their benefit, and that is one of the reasons created climate change. Bankers only see the risk in their bank, whereas the government see the whole banking system risk systemic risk, which is the main factor that led to the great depression. The government should check the level of the pollution and the possibility of the climate change in order to lower down the pollution before it is too late. If we dont know how serious of the pollution and unsure about that, then a small change may make the economy flip over. The banking developments are being grown faster in order to fulfil the demands of the people. One of the developments should be the more capital and liquidity asset are required to hold than they otherwise would to reduce the leverage ratio of banks and avoid them to over taking the risk. The lesser fund that the bank can be used, the lesser ability that they can invest, and consequently lower the risks. Even though the banks profit will reduce the profit of the bank, but the government not only see the banks benefit, in fact, government see the bigger risk, which is system risk. Besides that, the banks have got bigger and many activities are combined and hence, the economies of scale can be achieved. The investment banks combined most of the activities and make a profit from it. That is because the investment bank dealing with the pension fund and the insurance companies even though they do not receive deposits but they still can get a lot of large amount of fund from those institutions. They are the part of shadow banking system and they are not regulated. The investment banks use those funds selling and buying the securities to make profit and create a market to selling or buying the securities too. So, they have to borrow some money too to organize the market place and they do act like a bank because they are borrow in short-term and lend out in long-term. Hence, they are also created the systemic risk and since they are not regulated and did not have capital requirements, therefore, they are under increasing scrutiny and regulations after the subprime meltdown in 2008. Securitization is one of the banking developments. It is process of an issuer use a financial instrument to repackage the financial asset and sell it to the investors. Banks lend out a loan, might sell as a bond to an investment bank get the cash back and lend the money to other different type company to diversify the risks. In addition, the bond is rated before it issue out. Nowadays, the financial system is complex and difficult to regulate it and a lot of the events show that it i s still fragile. Everyone has been learned from the past crisis, and they are still struggling to reduce the likelihood of the crisis. Moreover, most of them havent recovered back from the crisis impact. The revolution should be taken and tried to jump out from the hot water because remain unchanged is just like it block the escape way by yourself. The reformation can help the banks able to survive when the climate change or to prevent the climate change. Nevertheless, the perfect way to sort it out is still need a longer time to figure it out. Furthermore, the $100billion question is still puzzled us. Don’t waste time! Our writers will create an original "Studying The Pollution In The Banking System Finance Essay" essay for you Create order

The Life of Katherine of Aragon - 1465 Words

Katherine of Aragon is famous for being the first of Henry VIII’s many wives, the one who fought back and defended her papally sanctioned marriage; the mother of Mary I; and the daughter of Isabella of Castile and Ferdinand of Aragon, founders of the kingdom of Espaà ±a. These facts place her in the position of a traditional sixteenth century woman by defining her as wife, mother, and daughter. In these roles, many women have been overlooked as the subject of their own study, and it certainly makes sense to do this, as on the surface they are not in control of their own agency. Looking deeper, however, one can see that this role places women instead in a position of power. From behind the scenes, women like Katherine were able to pull the†¦show more content†¦Once the last Plantagenet was out of the way, Isabella and Ferdinand sent Katherine off to England with a valuable trousseau and a fleet of wealthy Spanish nobles. The trip was long and hard, but when they arriv ed in Plymouth they were greeted with joy and excitement. There were celebrations and dinners before they continued on their way to London. On the night of November 4, at the Bishop’s Palace in Dogmersfield, Henry VII, his son Arthur, and members of the Privy Council arrived unannounced to see the Infanta. After being told that she was already in bed Henry insisted on seeing her anyway and proceeded to her room where they met for the first time. On November 9, Katherine arrived in London, and she and Arthur were married on the 14th. After their marriage, they were taken to their public wedding bed, where they were to consummate their marriage. According to Katherine’s testimony in later years, nothing of the sort actually happened. When the couple emerged from the bed the next morning, the English report seeing a healthy boy of sanguine complexion. Yet both Katherine and her Duenna continued to insist that she was still a virgin. 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Unit 9 the Welfare System Human Services and Social Policy Free Essays

string(172) " Foster care parents who open their homes where children who need a safe haven for a few weeks or months, or long term foster care homes where children may live for years\." The Welfare System The Welfare System Instructor: Dr. Michelle March HN300-01 DUE: 12/20/2011 Instructor: Dr. Michelle March HN300-01 DUE: 12/20/2011 Franklin Moe, Jr. We will write a custom essay sample on Unit 9 the Welfare System Human Services and Social Policy or any similar topic only for you Order Now Human Services Social Policy Franklin Moe, Jr. Human Services Social Policy To understand the â€Å"Welfare System† one must know its history. The American welfare system has changed dramatically over the past 80 years. A 100 years ago, families, local communities, and charities; typically religious based, served as the safety net for those who had fallen on hard times. The Great Depression of the 1930s would see a change in social policy with the passing of President Roosevelt’s â€Å"New Deal† establishing Social Security and Aid to Dependent Children (ADC. ) Thus was born the American Welfare System. The U. S. welfare system stayed in the hands of the federal government for the next sixty-one years. Many Americans were unhappy with the welfare system, claiming that individuals were abusing the welfare programs by not applying for jobs, having more children just to get more aid, and staying unmarried so as to qualify for greater benefits. Further expansion came with the Johnson’s administration in the 1960s with the establishment of Medicare, Medicaid, Public Housing, and other programs. During the Reagan presidency it was claimed that mothers with infants should not be allowed to become dependent on the welfare system, and that providing assistance for children under one year of age constituted such â€Å"dependency† The welfare system remained relatively unchanged till 1996 when President Clinton signed a sweeping welfare reform law that is still a hot topic of public controversy today. When Clinton was elected he had the intention of changing the welfare system. In 1996 the Republican Congress passed a reform law signed by President Clinton that gave the control of the welfare system back to the states. Conservatives claim a dramatic decline in welfare caseloads, while Liberals attribute the decline to a once healthy economy (www. welfareinfo. org). â€Å"Compared with those of other western industrialized nations, the U. S. social safety net is exceptional in numerous ways. Federal, state, and local governments in the United States spend far less on social welfare per capita than do peer nations† (Schaefer Simmons, 2009 p. 1). The purpose of the welfare system is to address social problems (www. policyalmanac. org (ND) retrieved 11/27/11). â€Å"Some argue that the â€Å"importance† of a social problem depends on two things (1) the power and social status of those who are defining the problem and urging the expenditure of resources toward a solution and (2) the sheer number of people affected. Thus, the more people affected and the greater the social power and status of those urging a solution, the more important the social problem† (Chambers Wedel 2009 p. 7). However, it should be understood that social problems are â€Å"highly variable and depend on the viewer† (Chamber Wedel 2009 p. 9). â€Å"There are four points to consider when doing a social problem analysis: 1) Identify the way the problem is defined. 2) Identify the cause(s) to which the problem is attributed (its antecedents) and is most serious consequences. 3) Identify the ideology-the values, that is-that makes the events of concern come to be defined as a problem. 4) Identify who benefits (gains) and who suffers (loses) from the existence of the problem† (Chambers Wedel 2009 pp. 9-10). The welfare system is too complex a subject, and the social problems the system addresses are beyond the scope of this essay. However, I will discuss the goal and objectives for creating the welfare system, and address how these services are distributed. The federal government provides assistance through Temporary Assistance for Needy Families (TANF). TANF is a grant given to each state to run their own welfare programs. The TANF grant requires that all recipients of welfare aid must find work within two years of receiving aid, including single parents who are required to work at least 30 hours per week. Failure to comply with work requirements could result in loss of benefits. Eligibility for a welfare program depends on numerous factors. Eligibility is determined using gross and net income, size of the family, and any crisis situation such as medical emergencies, pregnancy, homelessness or unemployment (www. welfareinfo. org retrieved 12/12/11). A case worker is assigned to those applying for aid. They will gather all the necessary information to determine the amount and type of benefits that an individual is eligible for. The new welfare system actively discourages mothers from marrying. As the entire emphasis is now on getting the mothers into the workforce, and adding that the period during which they can receive â€Å"benefits† greatly extends if they remain single, the new version of the welfare system is both undermining traditional family values and even contributing to the poverty level by its continuing focus on keeping mothers single and in the workforce. One cannot talk about the welfare system without a focus on child welfare. Child welfare is a broad term that is used to describe the process of protecting children from abuse and neglect. A comprehensive child welfare system usually has multiple components and may involve numerous social services agencies working together in a community to provide a safety net for vulnerable children. In most communities a child welfare services include investigations of child maltreatment, foster care, protective living arrangements for children, counseling, financial assistance, and adoption programs. The scope and quality of child welfare services varies a great deal from one community to another (www. welfareinfo. org retrieved 12/13/11). The purpose of the investigative program is to inquire into allegations of abuse and neglect. Many times these referrals are screened out. Many of these investigations do not turn up any evidence of neglect or abuse however, when the children are in imminent danger of harm from further abuse or neglect, the children services investigations will turn the case over for placement. Most child welfare services also provide foster care. Foster care can consist of emergency shelters where children are housed for a few hours or days. Foster care parents who open their homes where children who need a safe haven for a few weeks or months, or long term foster care homes where children may live for years. You read "Unit 9 the Welfare System Human Services and Social Policy" in category "Papers" Some child welfare services programs also operate residential programs which are specialized to provide care for children who may suffer from extreme emotional and behavioral problems. However, there are more children in need of foster care than there are foster homes and group homes in which to place them, child welfare agencies typically have programs for what is known as family preservation. The purpose of these family preservation programs is to provide intense counseling and support for a multitude of family problems according to The History of the Welfare System (www. voices. yahoo. om retrieved 12/12/11). Families involved in these programs may have a combination of problems that range from substance abuse, domestic violence, emotional problems, severe mental disorders, financial difficulties, and lack of appropriate parenting skills. The family preservation programs provided through the child welfare system helped to keep children in their homes when the abuse or neglect was relatively mild. When the parents receive the proper kinds of support and intervention many of them are able to continue to provide care for their children and keep them free of abuse or neglect (www. elfareinfo. org retrieved 12/14/11). Many child welfare programs also incorporate eligibility programs that provide welfare benefits to enable parents who live in poverty to apply for food stamps, Medicaid, childcare subsidies, housing subsidies, and other assistance to help these parents provide basic needs for their children. The ability to access these services allows many families to feel less stress in taking care of their children, and helps keep children from having their basic needs for food, clothing, and shelter go unmet (www. welfareinfo. org retrieved 12/15/11). Most child welfare services also have programs that arrange for adoption. Adoption is necessary for child welfare programs so that permanent homes can be found for those children whose parents are unable to raise them in a safe healthy environment. The termination of parental rights is the last resort for families who are not able to keep their children safe, but this process occurs after all the alternatives that child welfare programs have to offer and have been tried. The welfare system in and of itself is nothing; it is a conglomeration of policies and programs. There are three styles of welfare policy analysis: the analytic-descriptive, the value-committed, and the value-critical methods (Chambers Wedel, 2009 p. 44). While recognizing that political occasions will arise during which is essential? The value-committed approach is rejected because it is not open to new data or conclusions. The fact argues for the value-critical style which forces into the open, the effects of ideology is inherent in the analytic method use. The analytic-descriptive method fails as a policy analysis because it commits the analyst to unattainable assumptions. Such assumptions can be unrealistic because any judgment of social programs requires judgment of social worthiness (Chambers Wedel, 2009, p. 44). Chambers and Wedel explain there are six policy elements which form the cornerstone of every policy and program of the welfare system. It is these elements on which the practical social policy analyst ultimately will base judgments about a policy or program. The six policy elements are as follows: 1. Goals and Objectives 2. Forms of benefits or services delivered 3. Entitlement (eligibility rules) . Administrative or organizational structure for service delivery 5. Financing method 6. Interaction among the foregoing elements These six are without which a policy or program cannot be operated, they are necessary to implement a policy or program within the welfare system (2009, p. 38). Many studies have examined the effect of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) on employment trends, financial s ecurity and family structure, but few have considered the implications for mental health issues. Yet mental health is central to a key objective of welfare reform. Results suggest that before PRWORA, welfare recipients did not differ from other poor women in depressive or alcohol dependence symptoms. Ten years after the reform, welfare recipients experience more depressive symptoms than other poor women. This suggests that welfare reform left unusually symptomatic women on rolls. The finding also suggests that mental health services are critical if welfare recipients are to succeed in making the transaction from welfare to work (Rote Quandagno, June 2011, p. 29-245). Changes will come over time, administrations will continue to tweak the system here and there in the hopes of coming up with something better than previous generations. Drug testing may very well be a viable way to control abuse of the welfare system in the future too, welfare policies and programs are a hit and miss kind of thing, and it will be interesting to see what the future holds for the welfare system. Pove rty is a phenomenon within a capitalistic society. No amount of funding appropriated for the welfare system will ever be able to completely eradicate poverty. Some people, no matter how much resources they are given, cannot pull themselves out of the clutches of poverty. This has been proven time after time when poverty stricken people win the lottery and end up worse off than they were before winning. As long as there is poverty then we can hope at least in the United States of America there is the welfare system to fall back on for the truly needy. References www. welfareinfo. org Schaeffer, H. L. amp; Simmons, E. D. The development of an unequal social safety net: Journal of Sociology and Welfare, Sep 2009, vol. 36 issue 3, p179-199 www. policyalmanac. org/social_welfare/index. shtml Chambers, D. E. , Wedel, K. E. (2009). Social policy and social programs: A method for the practical policy analyst (5th ed. ). Boston, MA: Pearson www. voices. yahoo. com/welfare Rote, S. Quandagno, J. : Depression and Alcohol Dependence among Poor Women: Before and After Welfare Reform: Social Service Review; Jun2011, vol 85 Issue 2, p229-245, 17p. How to cite Unit 9 the Welfare System Human Services and Social Policy, Papers