The Credit Rating Agencies, Their Role in the Financial Crisis and What Is Next free essay sample

I would also like to thank Northeastern University for allowing me to discover a new culture and a different educating system. It also had a tremendous role in my future accomplishment and professional career. In addition, I would like to thank all the professors I had during these four years of studying, whether it is at CESEM or at Northeastern University. They made this journey even more profitable and enjoyable. I would also like to thank David Menival, my thesis supervisor, who accepted to work with me on this project. Finally, I would like to thank my parents for always supporting my choices and being next to me when I needed them. They have been my guides and models in life and have always encouraged me to be better and push myself. Table of Content Introduction4 I. Credit Rating Agencies: Role and methods5 1) History5 2) Role and methods7 3) The Issuer-Payer model 9 II. We will write a custom essay sample on The Credit Rating Agencies, Their Role in the Financial Crisis and What Is Next? or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The Credit Rating Agencies and the Financial Crisis: is the thermometer responsible for the fever? 12 1) Background of the financial Crisis12 2) Credit Rating Agency are not fully responsible†¦ 14 ) †¦But they could have done better17 III. What is next? 20 1) Lessons learned from the crisis 20 2) Regularization of the existing Credit Rating system 21 3) A new rating system23 4) Creation of new Credit Rating Agency24 Conclusion26 Exhibits27 Bibliography32 Introduction A credit rating agency is a company whose role is to evaluate the default risk of a borrower, whether it is a private or public company or a State. Since 1909, when Moody’s emitted its first rating, the role of the Credit Rating Agencies has considerably evolved and the methods used have improved. Even though their ratings do not constitute buying or selling recommendations, they rapidly gained an almost â€Å"biblical authority†. Since the 1980’s, the credit rating agencies have, indeed, become a reference for investors that want to determine the creditworthiness of an entity. Their ratings influence investors’ behaviors and they are indirectly involved in the future of a State or company. After several economic meltdowns and the recent financial crisis, the three big Credit Rating Agencies have been the center of attention. Is their methodology appropriate to evaluate the creditworthiness of an entity? Does the issuer-payer model insure the best transparence? Their role and implications in the crisis have been meticulously examined and their functioning system has been questioned. Although their role in the crisis in undeniable, are the only responsible of the crisis? The system was defaulting and the predictions of the credit rating agencies turned out to be wrong. Which modifications should we bring to the system to make it more transparent and efficient? These are the questions we will try to answer throughout this thesis. I. Credit ratings agencies: role and methods Credit Ratings agencies, entity still little known outside the financial communities two years ago, found themselves at the center of attention with the subprime crisis. If everyone more or less gets, now, familiar with what a credit rating agency is, people usually do not know what are the origins of this business, its rationale and its financing model. 1) History The influence of the three main credit rating agencies (Moody’s, Standard amp; Poor’s and Fitch Ratings) was build step by step since their inception, in the early 1900’s. Historically, the ratings issued by the agencies did not have more value than the ones given by analysts or economic experts. They acquired this particular status when legislators and regulators attributed them a bigger place in their systems. The development of railroads companies marked the origin of these â€Å"Big Three†. These railroad companies were indeed fluctuating and needed nvestments to set up their infrastructures. As investors were concerned and questioned their capacity to reimburse their debts, Henry Varnum Poor published, in 1860, some financial information regarding the creditworthiness of those companies in order to help investors make their decision. Later on, in 1900, John Moody would also start publishing economic data on these companies and finally, in 1909, J. Moo dy gave his first ratings about railroad companies in â€Å"Moodys Analyses of Railroad Investments by attributing a letter to each of them; the credit rating was born. This system was progressively adopted by others credit rating agencies such as Fitch Publishing Company, founded in 1913 by John Knowles Fitch, which would later be known as Fitch Ratings. Finally, Less than thirty years later, the credit rating agency Standard amp; Poor’s is created after the merger of the Standard’s Statistic Bureau and the Poor’s Publishing Company. The development of the ratings is stimulated by several factors. First, its goal is to offer a service for investors by providing useful information that will help them in their decision-making process. In addition, the relative large size of the American territory discourage investors to search for information, they would rather pay for it than waste time looking for it. Moreover, the repercussions of the 1929 financial crisis and the consequences of the World War II, giving supremacy to the Economy of the United States, also favored the expansion of the concept of rating. In 1970, after the bankruptcy of Penn Central Railroad, the first doubts regarding the independence of the credit rating agencies appeared. This was the first time that the reliability and seriousness of the ratings were questioned. In order to reestablish the value of the ratings, the SEC (Securities Exchange Commission) created, in 1975, the â€Å"Nationally Recognized Statistical Rating Organization† (NRSRO) designation. The goal was to standardize and formalize the ratings regarding brokerage firms and banks with their capital ratios. At that time, seven agencies obtained the NRSRO designation. In 1990, after several new mergers, the number of NRSRO was only of three: Moody’s investor service, Standard and Poor’s and Fitch Ratings. In 2003, the Canadian agency Dominion Bond Ratings service Ltd also ained the status of NRSRO, followed by A. M Best Company in 2005. In June 2003, after the disorders caused by the bankruptcy of the company Enron, the regulation of the credit rating agencies and their NRSRO status needed to be examined. Multiple reports on the role played by the agencies in this case were published. Even though investors lost faith in them, they all agreed that they should ke ep the NRSRO status. In 2006, after years of critics toward the credit rating agencies, the functioning rules of the NRSROs were modified and the Credit Rating Agency Reform Act was promulgated. The objective was to regulate the internal decision process of the credit rating agencies while forbidding the SEC to control the rating system of NRSROs. Right after, in 2007, three more companies were added to the list of NRSROs: Japan Credit Rating Ltd, Rating amp; Investment Information Inc. and Egan-Jones Rating Company. Since April 2011, the list of agencies that received the NRSRO status counts ten names (See Exhibit 1, page 27). Finally, in July 2010, the Dodd–Frank Wall Street Reform and Consumer Protection Act reinforced the control over the ratings’ practices. This included a reduction of the conflicts of interest regarding the ratings of structured products and decreased dependence on ratings. It also allowed investors to sue a credit rating agency in case of fake or reckless rating. For decades, the three main agencies, Moody’s, Standard and Poor’s and Fitch Ratings, have been controlling the market, as high barriers to enter exist. The major ones are the importance of the reputation and the investors’ confidence in their ratings. Since their creation, these agencies have distinguished themselves with a particular role and specific methods. ) Role and Methods The Credit Rating Agencies evaluate the creditworthiness of debtors. Ratings can concern a company as well as a particular emission or securitization or any financial debt. They are usually solicited by the debt issuer but can also be attributed, if non-requested, after collecting public information. Credit Rating Agencies enjoyed a good reputation and an essent ial role in the financing of economies. Over time, regulators, for practical reasons, tried more and more to impose the use of the notation in the investors’ financing. This long-term trend follows upon the systematic financing by the market, whether it is in a simple formulation taking the shape of debenture or assimilated loans or new products where the risk of defect is difficult to comprehend because it is diffuse in complex financing methods such as the securitizations. Credit Rating Agencies have the role of processing the information for financial markets. They synthesize the information for market needs and the investors seemed to excessively grant their confidence to this information. Investors pay close attention to any modifications in ratings or to any entities placed â€Å"under observation†. The ratings issued by the credit rating agencies have a trustworthy value. Since investors usually do not take the time to look for information regarding a company or a State, they based their investment choices upon the rating given by the credit rating agencies. Therefore, the role of the credit rating agencies is essential. Basically, these agencies summarize all information available about a company or State and turn it into a rating that will then influence the future of an entity. However, it is necessary to underline that the ratings given are not buying or selling recommendations, they are only an evaluation of the creditworthiness of an entity, at a defined time, and statically calculated. Next to this informative participation, credit rating agencies contribute to the management of portfolios by giving advice to the investors via the medium-term orientations emitted with the rating. If a company tries to finance itself, the received grading will be determining for the conditions of the operation. Whether it is by financing through banks or by issuing bonds on the market, the more the grade will be raised, the more the company will be able to find cheap funds at low interest rates. On the other hand, a bad grade will imply higher interest rates and difficulties to find financing. The difference of levels between both interest rates will constitute the risk premium. This problem becomes particularly important for companies or States located within the â€Å"speculative† category. Major institutional investors do not want, indeed, to take the risk and, therefore, do not invest on these kinds of values. However, the rating is ot fixed and fluctuates throughout the life of the bonds. A decrease of the rating can lower the price of the bond. Likewise, a raise of the rating can be associated to an increased price of the bond. In order to correctly determine the default risk, Credit Rating Agencies use diverse quantitative and qualitative criteria that they translate into a gr ade. Credit Rating Agencies distinguish two types of ratings: short and long-term; the traditional rating that applies to loans emitted on the market and the reference rating that measures the risk of counterparty for the investor represented by this issuer. When evaluating the financial risk, credit rating agencies first take into consideration purely financial numbers such as the profitability, the return on investment, the level of cash flows and debt, the financial flexibility and the liquidity. More and more, the agencies integrate non-quantitative elements such as the governance, the social responsibility of the company and its strategy. It is also necessary to highlight the fact that the rating is usually associated with medium-term orientation, allowing to better estimate the future trend regarding the quality of the issuer. In some cases, a borrower can be placed â€Å"under observation†. The main steps in a company’s life (mergers, acquisitions, big investments†¦) are indeed, likely to influence and modify their structure. Credit rating agencies, subject to preserving the confidentiality of the received information and avoiding cases of insider trading, can have insider information on the financial state and the future prospects of the analyzed issuer, while reducing the cost of collection and data processing. They distinguish themselves from financial analysts, who, in principle, only have access to the public information. Even if they can benefit from insider information on behalf of issuers, they are dependent on the information provided by these issuers. Each Credit Rating Agency possesses its own rating system. In broad outline, grades are established from A to D with intermediary levels. Thus, the best grade is AAA, then AA and A for Standard and Poor’s or Aa, A, etc. for Moody’s. In addition, we can also find intermediate ratings; a â€Å"+† or a â€Å"-â€Å" but also a â€Å"1† or a â€Å"2† can indeed be added to the grade (e. g. AA+, A-, Aa2, etc. ). This allows a better and more precise classification of borrowers. These different ratings can be divided in two groups: the first category, â€Å"High Grade† includes all ratings between AAA and BBB and the second category, also known as â€Å"speculative†, for inferior grades. (See Exhibit 2, page 28) The biggest advantage of this system is to provide information at low costs for potential investors. Thanks to an easily understandable grade, but incorporating a vast amount of information, investors can quickly have an idea of the creditworthiness of a borrower. The ratings issued by these agencies are a more and more useful tool in the decision-making process of investors looking for relevant information. Current regulation obliges them to certify published information. As we have previously seen with the United States or Greece, the market strongly reacts and sometimes irrationally to any modification of a rating or to a simple announcement of a hypothetical revision. Credit Rating agencies have a real influence on markets. The impact of their decision on issuers and investors is decisive. On the contrary, an excessive reaction was completely predictable in front of their incapacity to forecast the financial crises of these last decades. 3) The issuer-payer model For more than half a century, investors that paid to obtain financial information about loan issuers financed the credit rating agencies. Thus, companies, local communities, States were given a rating, without asking for one or without their consents, but to answer to requests from bankers or investors that were holding these funds. Naturally, these â€Å"non-requested† ratings were only based on public information concerning such or such company. The Credit Rating Agencies sold their publications to bankers and capital holders who were looking for potential adequate investments. In addition to selling these â€Å"manuals†, the credit rating agencies could also offer others services to investors (weekly information about financial results of rated companies, actualization of the ratings, recommendations and advices of purchase and/or sell). However, the agencies will lose some profits as some investors managed to have the information and the manuals without paying for them. As from the beginning of the 1970s, Credit Rating Agencies started to charge their services to the issuers of bonded debt. This is the issuer-payer model. These issuers of debt (Companies or communities looking for investment) began to more and more directly solicit the agencies in order to obtain a rating. They believed that this rating would reassure investors during a slowdown of economic growth. Thus, from now on, it is more often the issuers of debts that will request a rating from the credit rating agencies to get an evaluation from them that would allow them to access to credit. This approach contributed widely to consolidate the place of the Credit Rating agencies and to legitimize their intervention. In fact, this translates well a swing of the balance of power between those who look for funds to invest in industrial projects and those who hold funds, while waiting for the best yield at the slightest risk. In a world highly regulated by finance, where pensioners and holders of capital are in a strong position, and where industrial and direct investors are in a position of requestors, it is now, more often, issuers who wish to borrow and will ask to be noted, that will pay the credit rating agencies for their services. This shift from an investor-payer model to an issuer-payer model compromised the independence of the credit rating agencies. In fact, in 2011, only 10% of the revenue of the agencies came from funds’ holders who wanted to know more about the validity, the risk and the potential profitability of an investment. From now on, the ones looking for capital are the ones financing 90% the credit rating agencies. The issuer-payer model strongly modifies the situation of the credit rating agencies. In this situation, the rating agency is used, and paid, by the market player who wishes to be noted to then be able to hope to obtain capital on financial markets. The question of the independence of the agency in its rating process is then very directly put: the rating agency will be inclined to note well a company which pays her to then try to obtain capital in good conditions on behalf of miscellaneous investors. However, the market has faith in this independence since a credit rating agency has to protect its reputation, and thus an agency could not take the risk of over evaluating one of its customers by fear of losing its credibility and thus all business. Credit Rating Agencies seem, indeed, more and more subjected to conflicts of interests, which decrease their reliability. The issuers pay the agencies to be noted, while credit rating agencies need the revenues from these same issuers. Besides, more and more often, the credit rating agencies mix two activities: consulting and rating. Therefore, in addition to evaluating a company, an agency also advises on current operations. A study for the SEC in 2008 revealed that some analysts from certain agencies participated in meetings between investors and issuers in which commission and rating were fixed. These conflict of interest generated criticisms and accusations against credit rating agencies and especially during the recent financial crisis. As the credit rating agencies were essential and indispensable to any players on the market that wanted either to invest or to find capital, they were at the heart of the upheaval. II. The Credit Rating Agencies and the Financial Crisis: is the thermometer responsible for the fever? In order to determine the responsibility that the credit rating agencies have in the financial crisis of 2008, it is necessary to understand how the crisis happened, which events punctuated it and what has been the behavior of the rating agencies throughout the crisis. 1) Background of the Financial Crisis Everything started when the American housing market suddenly collapsed after a steady rise in the 2000 years. To finance their consumption and acquisition of a house, American households did not hesitate to get into very high debts. The market was booming so there was a trust in the ability to get its money back with a substantial profit. As counterparty, they pawn their properties. This was a guaranty for banks to be paid because if the borrower could not reimburse what he owed, his property would be sold to honor his debt. When the phenomenon grows and affects a large number of households, the sale of their property causes the collapse of the value of the property. The downturn of the housing market was reinforced by the subprime system. Since 2002, the American Federal Reserve, which encouraged easy credit to boost the economy, allowed millions of households to become homeowners thanks to premium loans called subprime, with variable interest rates that can reach 18% after three years. These interest rates are fixed according to the value of the property; the greater the value, the lower the rate and vice versa. That is what happened when the housing market collapsed in the United States in the beginning of 2007. Households, lacking of ways to reimburse their debts to lenders, have caused the bankruptcy of several credit institutions that could not repay themselves since even when taking on the property, this one has a lower value than initially. Finally, banks were also touched by this phenomenon. They have indeed been numerous to invest in these lending institutions. Nevertheless, today, invested funds are gone. In order to compensate these losses on the housing market, banks were forced to sell their shares, leading to a decrease of their values on the financial markets. The crisis quickly expanded in Europe, where major European banks such as Dexia in France and Benelux or IKB in Germany lost a fair part of their investments. Besides, the bankruptcy of several European banks led to a confidence crisis on European financial markets. Banks have doubts about each other’s contamination by the subprime crisis and therefore, to be cautious, refused to lend money. Since international banks are linked to each other through financial agreements, the crisis rapidly extended, to reach Asia during the summer 2007. Only one solution seemed conceivable for banking institutions to face this lack of liquidity: sell their shares and bonds. This fast and quick intervention caused a sharp drop in stock value and all the European stock markets were affected (See Exhibits 3 and 4, page 29-30). In order to appease the crisis on the markets but also to bail out banks, the American Federal Reserve (FED) and the Central European Bank (CEB) decided to inject liquidity in the monetary system, hoping to gain back the confidence of investors to help stabilize the situation. On 9 August 2007, the CEB acted first by making available 94. 8 billion euros to banks, followed shortly by the FED which injected $24 billion to appease the spirits of investors. However, markets initially misinterpreted the message, considering their involvement as a sign of weakness. The next day, the CEB injected again 61 billion euros and the FED, $35 billion, but the markets felt down again. Finally, on August 13, 2007, the same action was repeated and the monetary market as well as stock markets around the world kept their heads above water. While it seemed like the financial crisis was faded away at the end of 2007, a second wave of crisis appeared from the banking sector at the beginning of 2008. This was due to the creation of new products such as residential mortgage-backed securities (RMBS), Asset-backed Securities (ABS). In fact, credit risk, such as subprime mortgages, were pooled and backed by other assets, more or less risky, in Collateralized Debt Obligations (CDO) (See Exhibit 5, pages 31). These clusters of scattered debts were then sold on the stock exchange by the issuer, like shares of a company could be given up. This results in the transfer of the risk of non-payment from issuers of mortgages to financial institutions: in particular banks, major consumers of CDO. In order to invest on the CDO market, some financial organisms went even further and created Structured Investment Vehicles (SIV) that did not have to respect the usual rules of prudence of the banking system. This amplified the risks taken and losses impacted on the performance of the bank. Other new products were also created such as Credit Default Swap (CDS), an insurance contract between two entities against a risk faced by one of two entities, such as the non-payment of a debt. The price of the CDS reflects the confidence in a particular issuer of a debt and is the basis for determining the value of the product of the debt. The crisis took a new dimension on September 15, 2008 with the bankruptcy of Lehman Brothers and AIG (narrowly saved by the Fed), as well as several American and European banks (HBOS in United Kingdom, Fortis in Europe, Dexia in France and Belgium, etc. ). This international and financial crisis still has repercussions on today’s stock markets and the end of the tunnel seems far away. The question raised here is the role played by the Credit Rating agencies in the crisis. Are they the only ones to blame for everything that happened? Are the actions intended by the rating agencies responsible for the crisis? 2) The credit Rating Agencies are not fully responsible†¦ Ever since the crisis, the credit rating agencies have been easy targets to blame for what happened in 2007 and the years after. Effectively they did not anticipate the downturn of the market, they continued to attribute good rating to banking institutions already hurt by the crisis with an increasing book of bad loans or bad papers that banks will have to deleverage. Many criticisms have been emitted about toward them. However, it is important to point out that they are not the ones and only responsible for what happened. They did not have power over a lot of factors that went wrong, and for that they cannot be the only to take the fault in the financial crisis. The thermometer could not be responsible for the fever. First of all, they are not responsible for the bankers or mortgage brokers who gave loans unwisely. These institutions lacked of common sense and thinking when offering credits. Banks and managers perfectly knew that unemployed borrowers would never be able to reimburse their mortgages. They have, indeed, disproportionately opened the gates of credit by taking for guarantee, when they did take some, the increase of real estate prices or their trust in the growth of the economy. They thought that they could make benefits if the debtor did not pay, as they believed that they could force the sale of the house for a higher price. However, real estate prices always end up going down and the economy is fluctuating. In an attempt to reduce the risk of these new kinds of loans, banks used securitization; they transformed these loans and resold them on the stock market. Therefore, mortgages securitizers are also to blame. Some companies such as Washington Mutual, Morgan Stanley or Bank of America were mortgages originators as well as mortgage securitizers, other like Goldman Sachs, Lehman Brothers and Bears Stearns bought mortgages directly to subprime lenders and pooled them together to resell them to investors. However, as soon as a debtor was not able to pay back his mortgages, the security became toxic and had no more value. Nevertheless, this was not the last step. Some banks would buy and bundled mortgage backed-securities into collateralized debt obligations, composed of different levels of risk. The creators of these new financial products are also responsible for the crisis. They bet against these risky CDOs by using credit default swap. (See exhibit 5) Government Sponsored Enterprises (GSEs) could also be blame for what happened. They indeed, control the mortgage market. When a bank or a mortgage broker wanted to take off his books a loan, it could sell it to a GSE, which led to a higher number of mortgages. Fannie Mae and Freddie Mac are the two major GSEs. Alone, they own or guarantee half of the current mortgages. With their â€Å"government status†, investors can buy those bonds while asking for a low interest rate in return, as federal government bonds have the safest credit rating in the world. As long as debtors paid back their mortgages, Fannie Mae and Freddie Mac would be able to pay their creditors too. However, as these loans where often given out, even to people we knew could not reimburse, GSEs had to assume the risk. Therefore, we could also say that investors could be blamed for the role they played. They bought and invest in financial products they did not know about. They should have conducted researches about what they were purchasing and should have known these were subprime and meant a higher risk of non-payment. However, we have to see the bigger picture. At that time, banks received pressure from higher instances to encourage homeownership and so, to grant loans to the poorest population. The government wanted households with a less comfortable life to be able to buy their own house. The pressure that was put on the banks â€Å"forced† them to give mortgages to debtors that would ikely not pay back. This being said, borrowers are also responsible for contracting loans that they pertinently knew they could not afford. Moreover, the credit rating agencies are also not responsible for the debt of the countries. They have often been accused to do be the reason for the deficit of some countries such as Greece. Nevertheless, Greece has always had a huge deficit. They neve r had a break-even budget in 150 years, and governments from left to right parties systematically laid about the finance of the country. In addition, the national sport is not the Greco/Roman wrestling or the Marathon but how to avoid paying taxes; nothing in which the rating agencies were involved. Furthermore, regulators could have also done a better job to prevent the crisis. In the United States, several regulators exist and each of them has a specific area of expertise. The regulation of the banking sector is shared between the Federal Reserve (Fed), the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (which guarantees the deposits of bank customers) and the Office of the Thrift Supervision (OTS). There is also The Securities and Exchange Commission (SEC) that is responsible for the supervision of stock exchanges. The Financial Industry Regulatory Authority provides the regulation of brokerage activities. Finally, the Commodity Futures Trading Commission (CFTC) insures the regulation of futures and options markets. This various regulators could have acted to appease the situation. The SEC could have, indeed, regulate lending practices at banks and force them to keep more capital reserves in case of losses. The Federal Reserve could have contained the housing bubble by setting safer mortgages lending standards, which it failed to do and especially when Alan Greenspan who was the head of the FED, refused to improve the examination of the subprime mortgage market. Finally, according to the Financial Crisis Inquiry Report, executives in the main investment banks did not hold enough capital to be fully protected against losses. Some companies, such as Lehman brothers or Citigroup would just hide bad investments off their books. It is mainly a problem related to the liquidity crisis that led to the bankruptcy of Lehman Brothers. Lehman Brothers, indeed, financed itself on the short-term and lend on the long-term. When the source of the financing dried up (banks did not trust each others by fear of not being paid off), Lehman found himself stuck and was enabled to face its commitments. If the credit rating agencies were not responsible for the mortgage originators or securitizers, the creation of the CDO, the regulators or the executives of the investment banks, they surely played a tremendous role in the crisis ) †¦But they could have done better The credit rating agencies are responsible for a lot in the financial crisis. Several aspects of their business as well as the actions they have done have been pointed out as the main cause of the crisis. First of all, the pertinence of their business model was questioned, among others the oligopolistic situation of the market and the conflict of interest creat ed by the issuer-payer model. The â€Å"Big Three† (Standard amp; Poor’s, Moody’s and Fitch Ratings) generate 95% of the $6 billion market that the rating business represents. These three agencies dominate the market and adopt similar methodologies and practices. The business model of the rating agencies establishes itself on the independence and the credibility granted by the financial markets and the authorities of supervision. That is why, in the absence of statutory reforms and / or of the desertion of numerous customers, the leadership of the â€Å"Big Three† will be maintained, protected by strong barriers of entry (reforms difficult to set up and loyalty of issuers often connected to the heaviness of the rating process). Besides, the oligopolistic situation is strengthened by a consolidation, on the initiative and thus for the benefit of the â€Å"Big Three†. So, Fitch acquired in June 2000 the fourth American rating agency, Duff and Phelps, and in December 2000 Thomson BankWatch. At the beginning of 2006, Fimalac gave up 20 % of Fitch Group (who, herself, holds Fitch Ratings, Fitch Training and Algorithmics, this last company having been acquired in 2005) to Hearst Corporation. Likewise, the French subsidiary of Standard amp; Poor’s acquired ADEF (Agency of Financial Evaluation). Another reason why the credit rating agencies played an important role in the financial crisis is because of the conflicts of interest they were facing with the issuers. If some say that these conflicts of interest were of minor importance since there are always conflicts of interest in relationships, in that case, it had serious consequences on the global economy, as they are one of the causes of the subprime crisis in 2008. It is, indeed, the issuer that pays the rating agency so that this one estimates its capacity to pay off its debt. It is thus relevant to wonder about the partiality and the objectivity of the rating agencies which find themselves at the same time judge and judged and which can be inclined to note well its customers to keep their market share. Besides, the transparency that the rating agencies show in their methodologies and during their changes of ratings is unreliable as far as these sudden reversals seemed to have destabilized the markets. The three major credit rating agencies also contribute to worsen the financial crisis by their practices. They were, indeed, a key factor in the financial meltdown. They attributed a rating to every products offered on the stock market. Even mortgage-related securities received a good grade, which made it easier to market and sell them. As we have seen previously, the ratings that they gave had an almost â€Å"biblical authority†, so investors trusted the rating agencies to be fair and to give relevant grade to each product and did not conduct further investigation regarding their investment. Credit Rating Agencies were necessary to the mortgage-backed securities market; each actor in the process needed them: The issuers, to approve the structure of their deal The banks, to determine what capital to hold The investors, to know what to buy Since 1970, when the credit rating agencies got the status of NRSRO, the SEC decided to base the capital requirements for banks on the grades given by the rating agencies. This is also included into the banking capital regulations as the recourse rule, which allows banks to hold less capital for higher -rated securities. The SEC also prevented money market funds to buy securities that did not receive ratings from at least two NRSROs. Without these good ratings, banks would not have been able to place these financial products so easily onto financial markets, and the investors would have never bought them. Theirs ratings helped the market to go up rapidly and their downgrades between 2007 and 2008 wreaked havoc across markets and firms. These ratings, especially the ones for the mortgage-backed securities, appeared to have been very optimistic. But what we could observe, throughout the crisis, is the gregarious reflex of the credit rating agencies. They usually agreed on the ratings and when one of them downgraded a security, a company or even a State, the others would usually follow and did the same thing. As we have seen, the Credit Rating Agencies have indeed played an important role in the financial crisis. However, they are not the only one to blame. Thus, we can say that the thermometer is not responsible for the crisis but it could have given a better temperature of the situation. III. What is next? As we discussed, the credit rating agencies have been criticized a lot during the crisis and some flaws of them have been pointed out. In order to improve their efficiency, it is important to understand what we have learned from the crisis and then propose a better regulation or an alternative to the Big Three. 1) Lessons learned from the Financial Crisis The first lesson learned from the crisis is the impact of the globalization of financial markets. This has linked countries together in a greater extent than they were before. That is why, in today’s economy, any crisis that hits a main country or group of countries will have repercussion on all other countries. The financial crisis of 2008, started in the United States with the subprime bubble. Then it grew bigger and affected the rest of the world almost immediately compared to the 1929 crisis which also had worldwide impact but more gradually. We have to keep into consideration this new factor and realize that globalization plays an important role in the current worldwide economy. In addition, a country and its financial system need to be better prepared to face the crisis, in order to limit economic and financial damages. This means having a sound and well-regulated environment, keeping its inflation rate low, its exchange rate flexible, and its debt position sustainable. By doing that, a country would limit its vulnerability in front of any financial crisis. Moreover, the country should use fiscal and monetary policies to be able react quickly in case of external shocks. Another lesson learned is the question of the financial supervision. The global crisis is a crisis of confidence, which must impose rules on investment in the financial market, such as CDS (Credit Default Swaps) and short-selling of securities, clearing of OTC derivatives to reduce risks, CSD (Central settlement and Depository) regulation to protect investors and also Hedge Funds transparency. In macroeconomics, monitoring means imposing laws and rules on a structure with what is called the invisible hand. In our case, the invisible hand is the World Bank and the International Monetary Fund and the States, which have full power to intervene and better regulate transactions in the financial markets. This crisis also revealed some weaknesses regarding risk planning. Research based on various methods, including country case studies, confirmed that the more the planning is important, the more the quality of the financial services of a country is raised and more the financial intermediation is efficient. The planning of the risks led a certain number of countries to revise their financial structures to adapt itself to the global economic transformations. Finally, we can say that every good thing comes to an end, positive times do not last forever and the end is most likely going to be painful. In today’s financial system and global economy, we cannot avoid financial crisis, we can just hope that enough efforts will be done to improve our financial system and to limit the impacts of future crisis on our economy. If we focus on Credit Rating Agencies, to have a sound environment, it is worth considering a better regularization of our existing Credit Rating system, a new and improved rating system or the promotion of totally new credit rating agencies. 2) Regularization of our existing Credit rating system After the dysfunction of our system translated for instance into the collapse of Lehman Brothers, the disappearance of famous institutions such as Bear Sterns or Merrill Lynch, G7 members stressed the financial industry to improve its functioning mode and enhance the regulation. Several critics have indeed been directed to the credit rating agencies regarding the methodologies used by those agencies (including the growing place of the so-called political factors), the lack of transparency of their decisions, the rudimentary explanation accompanying the changes in notation, the moments selected to realize their announcements of ratings and finally, the potential conflicts of interest. All these aspects need to be taken into consideration when aiming to regulate the rating agencies. Various reform proposals have been recommended. Among them, you find some proposing the suppression of the government’s influence over this industry, or even the creation of a completely government-sponsored rating entity. However, the final goal is the accuracy of the credit rating. The first main step toward a better regulation happened in 2006, when a new section to the Securities Exchange Act has been added. The objective was to â€Å"improve rating quality for the protection of investors and in the public interest by fostering accountability, transparency, and competition in the credit rating industry† (ANNUAL SEC REPORT, supra note 22, at 16). The market is an oligopoly; the Big Three set the tone for the rest of the industry. Encouraging competition should give more choices to investors, at a lower cost and with better quality ratings. Several rules were added along the way, especially in 2009, when the SEC’s new rule addressed conflicts of interest, fostered competition and required detailed disclosure. For example, a NRSRO could not anymore issue a rating in which it had advised the bank or the issuer for the structure of the product. Another change emerged from the Dodd-Frank Act, in 2010, where a whole chapter has been dedicated to the rating agencies: â€Å"improvements to the regulation of the Credit Rating Agencies†. The Dodd-Frank Act qualified the agencies as â€Å"gatekeepers† for the debt market and that is why they needed â€Å"public oversight and accountability†. This meant reducing the investors’ reliance on ratings by limiting references to NRSRO ratings from rules, increasing the liability exposure, maintaining and informing on the structure of the ratings, as well as filing control reports yearly. However, both of these new reforms showed weaknesses, particularly in addressing the conflicts interest coming from the issuer-payer model, or the oligopoly. As mentioned before, several proposals would appear more efficient to answer these problems. The first proposal would be the elimination of the NRSRO status, which would remove any regulatory reliance on the ratings. This would also drive prices down as there would be an increasing competition, but it would also improve the rating quality and the innovation. Nevertheless, this proposal would lead to a total revision of the entire bank regulatory system and could also increase the pressure to satisfy issuers. The second proposal was to create a totally government-sponsored rating industry. This would make the rating a public good, eliminating any conflicts of interest due to the issuer-payer model. Although appealing because it resolves one of the main critics emitted during the financial crisis, it does not say who is going to pay for the subsidization. Finally, another more recent proposal called â€Å"disclose or disgorge† asks for the agencies to disclose the quality of the ratings they give, which means disclose to the public when a rating is â€Å"low quality† or disgorge benefits made with the rating. However, charging penalties would increase the barriers of entry on this market and discourage potential NRSROs. The rating business faces two major problems, the oligopolistic situation of the market that is being maintained by an increased regulation that secures the Big Three, and the issuer-payer model that fosters the conflicts of interest. Even though several reform proposals have been suggested, none appears to be totally conceivable. 3) A new rating system We have seen that a lot of reform proposals exist in order to enhance and increase regulation of the rating system. These proposals, indeed, reveal that some aspects of this business need to be improved. Eventually, a new rating system is worth considering. First of all, we have realized already touch based, throughout this analysis that the business model of the credit rating agencies needs to be modified, especially the issuer-payer model. The fact that the issuer is the one that pay the agencies for their ratings creates a conflict of interest that has to go away to insure an accurate and objective rating. In order to solve this issue, a new model is necessary. A possible idea to get there would be to make, not the issuer, but the investors (the ones that want to know the rating of a company or an entity) to finance the credit rating agencies. It is indeed them that need to know the rating of an entity, so it would be fair for them to pay in order to know what they are investing in. This would solved the problems related to the conflict of interest as rating agencies will not be tempted to give a good grade just to satisfy the client and avoid loosing profits. This was actually the model that existed before 1970, when the issuer-payer model was established. The shift to a model investor-payer would constitute a deep change for the whole rating industry but would eliminate the conflicts of interest. Another change that would be conceivable would be to set up a â€Å"rating planning†. The credit rating agencies should emit their grading at a known rhythm. Therefore, companies or States would know when they would be rated. For example, every January 1st, they could give their ratings for all entities. This would avoid sudden downgrades as we saw during the crisis, where rating agencies lowered the rating of a company right before it went bankrupt. Furthermore, to improve the accuracy of the ratings, a distinction between the rating of a company and a State should be made. In fact, Credit rating agencies do not evaluate the same thing when rating a country or a firm. That is why different ratings should be given according to the nature of the entity. Finally, this new rating system should have a better transparency of ratings. As this has often been reproach to the agencies, it is clear that we need to improve it. In order to get more transparency in the ratings, the credit rating agencies should be forced to make public some criteria that contributed to the rating process. In addition, when an entity is downgraded, there is ever a clear explanation. An explicit and standard comment should go along with the new ratings to explain the cause of the downgrade or upgrade. All these improvements should be made to obtain a more transparent and accurate rating. These changes could lead to more efficient and regular ratings where conflicts of interest would be inexistent and where the distinction between entities would improve the relevance of the ratings. 4) Creation of a new credit rating agency Finally, another solution that arises would be the creation of a new rating agency. This proposition is particularly discussed in Europe. The arguments called in favor of the creation of a European rating agency are multiple. It would be a question, first of all, of introducing more competition into a sector that is today dominated by three major actors. Standard and Poors, Moody’s and Fitch Ratings are indeed sharing more than 90 % of the market, a situation which confers to the members of this Big Three a tremendous capacity of influence. To create a new rating agency would be a way of having a bigger diversity of points of view. The trust that would be granted by the investors to a new European agency would depend however on its capacity to avoid the criticism sent to Big Three in terms of independence and conflict of interest. It would also be necessary to specify the status of the new agency: a public or a private organization? A public rating agency could face the mistrust of the investors, who could doubt its independence towards public authorities and States, which it would have the mission to evaluate. On the other hand, a private agency would look like a non-profit foundation. The rating agency would be financed by the investors who would use its notations, and not by the entities emitting the financial products, which would allow guaranteeing its independence. Nevertheless, the future prospects of such a structure remain uncertain: to what extent would it be able to impose itself in front of Big Three, in a sector where the experience and the reputation of the institution play a determining role? In addition, a history of ratings would be necessary to evaluate the evolution of an entity and a strict method is mandatory for accurate rating. A new rating agency would not be able to have all of these factors before several years. To conclude, it is not easy to find the best solution to improve the current rating methods. Different regulations have been tried, all presenting good points but also flaws. However, what we need to enhance is clear: better transparency, a more accurate rating and a suppression of the conflicts of interest. Conclusion The role of the credit rating agencies in today’s economy is crucial. They evaluate the creditworthiness of an entity, influencing investors and interest rates. However, during the crisis, their role has been criticized. Several factors can explain their controversial position. The oligopolistic situation of the market, their supposedly trustworthy evaluations given by their NRSRO status, as well as the conflicts of interest coming from their issuer-payer model are the main causes of the critics emitted toward them. Recently, the American justice even pressed charges against the rating agencies for their role in the crisis and asked for five billion dollars. Nevertheless, even if the credit rating agencies are the ideal responsible, they are not the only ones to blame. Now that the crisis revealed the different flaws of their system, we can only improve them going forward. Several regulations have already been approved and others are still under consideration. Other ideas to enhance the rating system include a new financing model, by perhaps considering going back to the investor-payer model, a better transparency of their rating, by showing the criteria used for their ratings, and a distinction between a company or a security and a State, which are two completely different entities. Lastly, we can wonder if the Credit Rating agencies still have as much influence as they used to. For instance, when downgrading both the United States and France, the repercussions were minors even nonexistent. The lost of their triple A did not bring the interest rates up as it should have, since today the interest rates are historically low in both these countries. Exhibits Exhibit 1 Credit Rating Agencies with the NRSRO designation Exhibits Exhibit 2 Rating systems of the Big Three Source: Credit rating Wikipedia, the free encyclopedia.   Wikipedia, the free encyclopedia. N. p. , 7 Mar. 2013. Web. 13 Mar. 2013. lt;http://en. wikipedia. org/wiki/Credit_ratinggt;. Exhibits Exhibit 3 – Important facts about the crisis Exhibits Exhibit 4 – Evolution of market indexes from August 9 to 16, 2007 Index| Evolution| Dax (Germany)| -4,42%| Dow Jones (USA)| -5,95%| Nasdaq (USA)| -6,16%| FTSE 100 (United Kingdom)|   8,37 %| CAC 40 (France)| -8,42%| Nikkei (Japan)| -10,3%| Exhibits Exhibit 5 – Residential Mortgage-backed securities These tranches were often purchased by CDOs These tranches were often purchased by CDOs Source: The financial crisis inquiry report: final report of the National Commission on the Causes of the Financial and Economic Crisis in the United States. Official government ed. Washington, DC: Financial Crisis Inquiry Commission :, 2011. Print Bibliography * Dupuy, Claude . La crise financiere 2007-2008 Les raisons du desordre mondial C. francetv education la plateforme des parents, eleves et enseignants. N. p. , n. d. Web. 12 Mar. 2013. lt;http://education. francetv. fr/dossier/la-crise-financiere-2007-2008-o21596-chronologie-de-la-crise-2007-2008-780gt;. Gannon , Jack. Help the Credit Rating Agencies get it right. Annual review of Banking and Financial Law 31 (2012): 1015-1052. www. bu. edu. Web. 10 Mar. 2013. * Gedos, Jean-Guy, Oussama Ben Hmiden, and Jamel Henchiri. Les Agences de Notations Financieres, Naissance et evolution dun oligopole controverse. Revue Francaise de Gestion 227 (2012): 45-63. Print. * Goldberg, Adam. Credit Rating Agencies Triggered Financial Cris is, U. S. Congressional Report Finds.   The Huffington Post. TheHuffingtonPost. com, 13 Apr. 2011. Web. 12 Feb. 2013. * Gourgechon, Gerard. Les Agences de Notations. http://alternatives-economiques. fr. N. p. , 17 Jan. 2012. Web. 3 Mar. 2013. lt;http://alternatives-economiques. fr/blogs/gadrey/files/agences-de-notation26p. pdfgt;. * Krebs, Joshua. The Rating Agencies: Where we have been and Where do we go from here?.   The Journal of Business, Entrepreneurship amp; the Law  3. 1 (2009): 133-164. Print. * McLean, Bethany, and Joe Nocera. All The Devils Are Here, The Hidden History of the Financial Crisis. New York: Penguin Group, 2010. Print. * Mieux comprendre la crise Universcience. Cite des Sciences. N. p. , 1 June 2009. Web. 12 Mar. 2013. lt;http://www. cite-sciences. fr/fr/bibliotheque-bsi/contenu/c/1239022244230/mieux-comprendre-la-crise/gt;. * Panchuk, Kerri Ann. Credit ratings agencies a key cause of the financial crisis: Senate report | HousingWire. U. S. Housing Finance News | HousingWire. N. p. , 14 Apr. 2011. Web. 12 Mar. 2013. lt;http://www. housingwire. com/news/2011/04/14/credit-ratings-agencies-key-cause-financial-crisis-senate-reportgt;. * Pelletier, Cecile. Crise financiere : les cles pour comprendre La crise des subprimes. LInternaute : actualite, loisirs, culture et decouvertes. N. p. , n. d. Web. 12 Mar. 2013. lt;http://www. linternaute. com/actualite/economie/international/crise-financiere/1-crise-des-subprimes. shtmlgt;. * Piliero, Robert D.. The credit rating agencies: Power, responsibility and accountability. Thomson Reuters News and Insight Legal: Legal News, Information and Analysis. N. p. , 19 July 2012. Web. 12 Mar. 2013. lt;http://newsandinsight. tho msonreuters. com/Legal/Insight/2012/07_-_July/The_credit_rating_agencies__Power,_responsibility_and_accountability/gt;. The financial crisis inquiry report: final report of the National Commission on the Causes of the Financial and Economic Crisis in the United States. Official government ed. Washington, DC: Financial Crisis Inquiry Commission, 2011. Print. * Verschoor, Curtis C. Credit Rating Agency Performance Needs Improvement. Strategic Finance 1 Jan. 2013: 17-19. Print. * Vodarevski, Vladimir. Crise financiere: qui est responsable? Analyse Liberale. Analyse Liberale. N. p. , 22 Feb. 2009. Web. 12 Mar. 2013. lt;http://economie-analyses-actualites-opinions. over-blog. com/article-28216064. html

A Separate Piece essays

A Separate Piece essays In the novel A Separate Peace, friendship plays an important role in Genes stay at Devon. Genes relationships with Finny, Brinker, and Leper are the ones that had the most significant impact on him. The friendship between Gene and Finny was extremely complex. At some points, you think that they are undoubtedly best friends, like when Gene and Finny had just jumped from the tree, and Finny stated, Its just you and me pal. Other times it seemed as though they were not friends. One example was when Gene blew up at Finny when Finny tried to get him to skip studying and go watch Leper jump from the tree. Finny always seemed to be Genes friend without a doubt but Gene always seemed to have a deep resentment for Finny. This feeling of resentment led him to jounce the tree limb and make Finny fall and shatter his leg. Finny, however, wouldnt believe that Gene would actually make him fall, because he thought their feelings toward each other were equal. When Finny finally realized that Gene betrayed him, he began to run and he fell down a flight of stairs and broke his leg again. In the end, Genes resentment toward Finny led to his death, which surely had a lasting impact on Genes life. The friendship between Gene and Brinker wasnt really a close one like the one with Gene and Finny. Gene and Brinker didnt really become friends until after Finny had gone home to recuperate. There were not many occasions when they show much friendship toward one another. However, when they ended up on the same clean-up squad at the railroad yard, they began to talk quite a bit. When Brinker and Gene returned from cleaning at the railroad yard, they had made the decision to enlist in the war together. Finny had just returned from his recuperation and didnt want his best friend Gene to leave him. This caused problems for Gene and Brinkers relationship. Brinker wa...

Definition and Examples of a Persona in Literature

Definition and Examples of a Persona in Literature A persona is a voice or mask that an author, speaker, or performer puts on for a particular purpose. Plural: personae or personas. Persona comes from the Latin word meaning mask, and may also be referred to as an implied author or an artificial author. Author Katherine Anne Porter explained the relation between writing style and persona: A cultivated style would be like a mask. Everybody knows its a mask, and sooner or later you must show yourself - or at least, you show yourself as someone who could not afford to show himself, and so created something to hide behind (Writers at Work, 1963). Similarly, essayist E.B. White observed that writing is a form of imposture. Im not at all sure I am anything like the person I seem to a reader. Various Observations on Persona [L]ike the I of the lyric and of the real and invented autobiography, the I of the essayist is a mask.(Joseph P. Clancy, The Literary Genres in Theory and Practice. College English, April 1967)The artful I of an essay can be as chameleon as any narrator in fiction.(Edward Hoagland, What I Think, What I Am)He who speaks is not he who writes, and he who writes is not he who is.†(Roland Barthes, quoted by Arthur Krystal in Except When I Write. Oxford University Press, 2011)You may rely on it that you have the best of me in my books, and that I am not worth seeing personally - the stuttering, blundering, clod-hopper that I am.(Henry David Thoreau, letter to Calvin H. Greene, February 10, 1856)Writing is a form of imposture. Im not at all sure I am anything like the person I seem to a reader. . . .[T]he man on paper is always a more admirable character than his creator, who is a miserable creature of nose colds, minor compromises, and sudden flights into nobility. . . . I suppose r eaders who feel friendly toward someone whose work they like seldom realize that they are drawn more toward a set of aspirations than toward a human being.(E.B. White, Letters of E.B. White, ed. by Dorothy Lobrano Guth. Harper, 1976) [T]he person in a personal essay is a written construct, a fabricated thing, a character of sortsthe sound of its voice a byproduct of carefully chosen words, its recollection of experience, its run of thought and feeling, much tidier than the mess of memories, thoughts, and feelings arising in ones consciousness. . . . Indeed, when personal essayists write about self-embodiment in the essay, they often acknowledge an element of fabrication or of artful impersonation.(Carl H. Klaus, The Made-Up Self: Impersonation in the Personal Essay. University of Iowa Press, 2010) Perlman on Person and Persona Persona is the Latin word for the masks used in the Greek drama. It meant that the actor was heard and his identity recognized by others through the sounds that issued from the open mask mouth. From it the word person emerged to express the idea of a human being who meant something, who represented something, and who seemed to have some defined connectedness with others by action or affects. (We still use person to connote this: we say of an infant who begins to show awareness of self in relation to others, Hes becoming a person.) A person makes himself known, felt, taken in by others, through his particular roles and their functions. Some of his personae - his masks - are readily detachable and put aside, but others become fused with his skin and bone.(Helen Harris Perlman, Persona: Social Role and Personality. University of Chicago Press, 1986) Hemingway's Public Persona According to those who knew him well, Hemingway was a sensitive, often shy man whose enthusiasm for life was balanced by his ability to listen intently . . . That was not the Hemingway of the news stories. The media wanted and encouraged a brawnier Hemingway, a two-fisted man whose life was fraught with dangers. The author, a newspaper man by training, was complicit in this creation of a public persona, a Hemingway that was not without factual basis, but also not the whole man. Critics, especially, but the public as well, Hemingway hinted in his 1933 letter to [Maxwell] Perkins, were eager automatically to label Hemingways characters as himself, which helped establish the Hemingway persona, a media-created Hemingway that would shadow - and overshadow - the man and writer.(Michael Reynolds, Hemingway in Our Times. The New York Times, July 11, 1999) Borges and the Other Self It is to my other self, to Borges, that things happen. I walk about Buenos Aires and I pause, almost mechanically, to contemplate the arch of an entry or the portal of a church; news of Borges comes to me in the mail, and I see his name on a short list of professors or in a biographical dictionary. I am fond of hourglasses, maps, 18th-century typography, the etymology of words, the tang of coffee, and the prose of Stevenson; the other one shares these enthusiasms, but in a rather vain, theatrical way. . . .I cannot tell which one of us is writing this page.(Jorge Luis Borges, Borges and I)

The Emerge of Islam Research Paper Example | Topics and Well Written Essays - 2000 words

The Emerge of Islam - Research Paper Example This resulted to civilization because it benefited the regions around for prosperity. It is arguable that the success of Islam in Palestine and Egypt is attributable to the effective administration that the Arabs employed in their conquered states. Religious accommodations largely influenced Islam in the ancient period thus establishing an empire that eventually spread to Egypt and Palestine among other countries. Egypt, for instance, since the beginning of the 700 A.D., embraced Islam to help define different features of its institutions and infrastructure. (Emon et al, p. 323). Additionally, Islam in Egypt found a public role in shaping the masses’ thinking and doctrines to aid them during the decision making periods. This was notable with the popularity of Islam amongst peasants and uneducated religious preachers in the rural areas unlike in the urban regions mostly inhabited by upper and upper middle class Muslims. According to these upper class Muslims, religion was a pri vate affair. In this perspective, it was upon the person to identify effective ways of supplicating before Allah. However, this negative attitude did not stop the rise of Islamic religious revival movements in the country. The movements eventually transcended class lines because they acted as a unifying factor in facing challenges such as inequality, poverty and oppression among others. By permitting women to receive education and conduct business unlike for Christians, Islam thrived immensely and affirmed its Empire in Egypt and Palestine among other states. Ancient and Historical Mosques found in Egypt. It is crucial to highlight of Arab unity that helped Muslims challenge the surrounding empires. The initial Islamic caliphs viewed conquests as a means of deflecting their control out of Arabia. There were powerful motives that transcended mere need for having new converts. Both the Persian and Byzantine Empire were strategic for attack, but the Persian Empire was an easier option. A powerful monarchy controlled the empire and suppressed the powerful occupants. The authorities instituted an imperial religion, Zoroastrianism, which attracted limited enthusiasm from the populace. The Arabs experienced limited resistance from the empire and this enabled the armies to oust all the emperors by 650 CE. The Byzantine Empire, in Egypt and Palestine, faced limited resistance from the subtle Christians. Furthermore, the Arabs possessed a special ability in naval wars. Islam’s development built an inherent strategy of uprooting civilizations (Roald and Longva, p. 63). The Romans and Greeks had helped entrench formidable political, economic, and cultural elements. For instance, in the Palestinian coasts, the Greek civilization was deeply rooted. These places were instrumental in the conquests’ struggle as the Arabs rose against the Byzantines. Gaza is a notable as an instrumental place in this struggle since it helped connect Palestine and Egypt (Hugh 88). Due to its strategic economic location, it became a major target for the conquering Islam forces. The conquests strove to retain the classical economic gains. After the defeat of the Byzantine forces at Yarmuk, the military triumph helped inspire

Case Study Essay Example | Topics and Well Written Essays - 1750 words

Case Study - Essay Example The combination of satellite, cable and fiber based broadband penetration together with targeting, interactivity, and company’s knowledge of people’s physical address and other contact credentials has launched a new era in marketing, organizational communication and advertising (Institute for Innovation and Improvement, 2006). ITV (an acronym for Interactive Television) is a range of technologies which has blended data services together with the traditional television technology. It entails enhancements and interactive contents. Interactive Television is enriched with providing interactions, rich entertainments, more information regarding various shows, props together with all the personnel responsible in its creation. Basically, Interactive television combines the features of the traditional television with interactivity which is enjoyed by people through a network such as LAN, WAN and internet (Interactive Advertising Bureau, 2011). Programming of interactive Television ranges from links to websites, richer graphics, and electronic communication among online users through a back channel. As a result, there is on – demand delivery of content together with services such as shopping, banking, ticket booking, among others (Institute for Innovation and Improvement, 2006). Digital Interactive Television exists in several forms and are manufactured by different companies. One form of Digital Interactive television is the Set top Boxes. This kind of Interactive Televisions are made by companies such as Microsoft, Motorola, Scientific Atlantic and Pace. This types of televisions are designed specifically to run interactive television services. During the manufacture of these products, the interactive TV is designed in such a manner that it can collect data from the user to the service provider (Institute for Innovation and

Who are the biggest winners and losers in a globalised world

Who are the biggest winners and losers in a globalised world The world is increasing influenced by Multination Corporation and global brand. Nowadays, the idea that globalisation produces winners and losers are widely accepted. The winners and losers from globalisation can separated into two general categories. One is developing countries and the other one is developed countries. In this essay I will prove there are significant more winners than losers in globalization. The developed countries or developing countries all are being benefited by globalisation. Definition of globalization According to one of most popular definitions which International Monetary Fund(IMF) are given, globalisation is the process through which an increasingly free flow of ideas, people, goods, services and capital leads to the integration of economies and societies. Globalisation is not a recent phenomenon. In 1962, the term globalization was first time come forth to the journal called The Economics. However, at that time globalization more likely as a term to use by economists rather than popular words can be found everywhere. Globalisation can be defined as following aspects: free trade, foreign investment, organizational change in corporate sector and technological change. Trade make an important role in globalisation. According to Charles and McGraw (2008), the Great Depression of the 1930s was caused by highly barriers in international trade. Government who govern their countries constrained the exports goods and labour services to other countries and high imports taxation rate to protect their domestic manufactures. Due to this experience, after World War II, General Agreement on Tariffs and Trade (GATT) are founded and made big impact in global trade market. World Trade Organisation (WTO) was established by GATT which make global trade system lower barriers through the principle and rules they negotiated. Free trade could reduce overall costs of production due to the imports; which company can purchase cheaper resource and workforce. Ultimately, free trade can cut our living costs and improve our living standards. Furthermore, free trade gives customers more choice on which products they are willing to buy. Because of free trade, we can get wider c hoice on domestic productions or international productions. Opening the domestic economies to foreign direct investment (FDI) is an important part of globalisation. The evidence (Charles and McGraw, 2008) suggests that FDI is making a significant role in the global economy. The outflow of FDI increased faster which from $25 billion in 1975 to $1.2 trillion in 2000. The multinational company made a significant influence in FDI. There has been a big change in the nature of the company due to the globalisation of the production and distribution. Corporations are now becoming part of global supply chains which spread their productions. As an international company they must adapt the international business environment quicker than domestic firms. Hence, they change their corporate strategy frequently. According to Charles and McGraw (2008) the role of technological change has made globalisation become more reality. Since the end of World War II, the world technological dramatically improved through Internet, telecommunication and transportation. Those improvements provide better condition for globalisation world widely. Winners in the developed countries Many people believe globalisation make developed countries become to loser due to off-shoring. Large employment opportunities are moving to developing countries because of cheaper labour costs. Off-shoring made lots of job lost in developed countries. However, all coins have two sides, job losses in the developed countries do not means all negative sides in globalisation. According to Charles and McGraw (2008), when the North American Free Trade Agreement (NAFTA) established in 1994, clothing prices in the United States have decreased. For instance, blank T-shirts wholesaled for $24 a dozen in 1994 but now they only sell $14 a dozen. The lower prices on production are benefit for most of American who have more money to spend on other times. Generally speaking in economic aspect, most MNEs are come from developed countries, which through FDI to expand their capital and make huge profits. FDI and free trade provide opportunities to MNEs gather cheaper raw materials and workforce which reducing the overall costs of productions. Most of the MNEs have more advantages because their enough capital and high technology supported. Therefore, MNEs will establish subsidiaries in FDI countries and sell these products with high price directly which can make large profits. Multinationals benefit most from globalisation according to 87% of EU citizens. Nowadays, MNEs seem as the leader in developed countries economics, they occupied large parts of domestic market. MNEs doing their business development well which can reflect the developed countries are winners from globalisation as well. Overall, developed countries are winners in globalisation, they gains outweigh the losses. Winners in the developing countries According Lancaster (2000), the six billion people in the world which have five billion people live in developing world. How much impact of globalisation on this countries and people? There are many argument about winners from globalisation in booming are not necessary shared equally in the global wide. When the distributions are not equally, the developing countries might become losers due to their poor condition on economy and politics aspects. Peaceful and stable are essential for developing countries in long-term development. If trade flows could improve smoothly and countries enjoy that peaceful relationship, it might avoid many political and economic conflicts between countries or regions. WTO is an important organisation in globalisation that makes vital roles to keep world peace. Most of developing countries are following WTOs principles and rules to trade and investment. Due to this peaceful environment, developing countries can concentrate on their trade market and economic development. Moreover, investment and trade are increased dramatically since 1990. There are more and more foreign direct investment in developing countries such as China, Indian, Mexico, and Thailand. Investments in those countries provide large employment opportunities and increase their exports and growth rate therefore improve overall standard of living. The Asian countries financial crises in the 1997 made many experts to fight globalisation become stronger. They believe developing countries are losers in globalisation. However, the experience of China has been used as a good example to prove they are the winner of globalisation. Before reform, China was the world most important opponent of globalisation which is not opening their trade market. Since 1979, reform policy made Chinas economic become most competitive and booming country in world widely. According to Michael Dauderstà ¤dt Jà ¼rgen Stetten (2005) purchasing power parity in China is ranks secondly after America. Share of world trade increased from approximately 1% to almost 6% between 1979 and 2003. Since 2001, China access to the WTO which provide better free trade market environment and also become more competitive in international market. In a word, Chinas experience in opening up reveals in what way a developing country can become winners from globalisation. Beside s, China gives other developing countries more confidence to support free trade market and globalisation. Conclusion In conclusion, both of developing countries and developing countries are winners eventually. Through free trade, foreign direct investment and organisation, world village becomes more and more possible. Whereas lose employment opportunities due to off-shoring or many domestic firms are bankrupted due to MNEs, which can not stop the globalisation steps. As we have demonstrated that there are significant more winners than losers in globalisation. The number of words: 1196

Novel Compared to Movie Adaptation Essay

Film adaptation or movie adaptation has been a widespread practice in cinematic tradition around the world. Majority of such adaptations are made from fictions, primarily novels. Some of the other popular sources include autobiography, plays, scriptures and comic books. When a novel is adapted for movies, there are certain techniques deployed to give it a cinematic appeal. Inventing new characters and altering scenes fall into the category of primary adaptation techniques. Sometimes it is also noticed that an insignificant character in the novel is given a prominent part to play in the film. Novels with exteriority and physically dynamic structures are most commonly adapted for filming. Thus, modern novels with their intricate literary devices (such as stream-of-consciousness, internal monologues, etc. ) are difficult to make fit for movies. While changes are mandatory due to time constraints and nature of the medium, extreme care must be taken so that the original essence of the novel is not compromised. However, one school of thought argues that the director should treat the film separately from the novel as both are completely different works of art. Accurate arrangement of a novel at the time of filming is virtually impossible since both speak different literary languages. Contrary to this perspective, another school of thought steadfastly believes that the film must retain either the thematic or the aesthetic sense of its source. Changes should only be made wherever necessary. This doctrine lays more emphasis on the faithful reproduction of the source content. This article is going to make a comparative analysis between Fannie Hurst’s Imitation of Life and its cinematic adaptation of the same title directed by Douglas Sirk. One of the cardinal aspects of movie adaptation that every director must keep in mind involves the risk of taking the viewers away from the fiction: â€Å"It has been argued that these displays of technique and artifice make it difficult to respond affectively to art since they create distance between the fiction and the viewer. † (Sirk et al. 207) Cinema is quintessentially a self-reflexive form of art having a vast scope of expression. This freedom, if used discreetly and masterfully, may make an ordinary source look splendid. The novel Imitation of Life focuses not just on the crude nature of racism in America in the beginning of the twentieth century, but also, and perhaps on a more serious note, holds in view the limitations of the new women. Peola, one of the main female characters in the novel, represents the tragic predicament of being â€Å"neither black nor white yet both†. (Hurst et al. xxv) Her persistent struggle to live without black identity makes her suffer from the inconsolable loss of her mother. At the same time, Bea also gets entangled between career, romance and motherhood. She has to give up love and care for her daughter Jessie to pursue her career. The two sets of mother-daughter relationships portrayed in the novel, Bea-Jessie and Delilah-Peola, imply a subtle message which Hurst seeks to convey in the novel: a woman can’t â€Å"have it all†. (Hurst et al. xxv) The movie by Douglas Sirk does not deviate from the main plot of the novel to a great extent. Characters and conclusions in both cases are same, but the background is changed in the movie to suit the nature of time it depicted. It might be noted that the novel was written in 1933 whereas the movie was released in 1959. The identities of Lora and Annie as widowed single mothers are kept intact in the sense that Bea and Delilah are also shown as widowed single mothers in Hurst’s novel Imitation of Life. The cinematic counterparts of Jessie and Peola are Suzie and Sarah respectively. Lora’s fiance Steve is an adaptation of the character of Frank Flake in Imitation of Life. The movie Imitation of Life, as observed by Andrew Sarris in Film Culture, is characterized by an apparent notion of impossibility which Sarah wants to achieve – white skin. (Handzo 1997) If one attempts to make a comparative analysis between the movie and the novel, the element that comes to the fore is the introductory part. Sirk Douglas does without the elaborateness of Fannie Hurst in narrating the backdrop of Lora’s previous life when she was married. In the beginning of the novel, Bea is shown as a spinster who marries Benjamin Pullman. The subsequent chains of events that lead to Bea’s struggle for survival with an infant daughter are excluded from the movie. It opens with Lora’s soaring ambition of becoming a Broadway star – a curtain raiser which is followed by three social scenes the filmmaker conjures: â€Å"women and work, race relations, star mythology†. (Sirk et al. 27) In this sense, the movie mirrors the content of the novel in a threefold manner. To quote Sirk, â€Å"The mirror is the imitation of life. What is interesting about a mirror is that it does not show yourself as you are, it shows you your own opposite. † (Sirk et al. 3) As far as cinematic approach is concerned, the abrupt opening may be attributed to time constraints as well. However, the movie diverts from the novel in one critical aspect. While Bea pursues a successful career of businesswoman, Lora takes a different course altogether. Unlike the world of literature, the world of showbiz uniquely demands dynamism of action and hence, the characterization is justified per se. Another argument that can be cited with regards to the altered career path of the main protagonist of the movie is the shifting social climate in the times it was released. It was difficult for the filmmaker to envision his heroine as the owner of pancake restaurants. Moreover, during that phase many Afro-American actors were striving to put behind the stereotyped roles of household attendants. So changes in the storyline are especially reflected in the characterization of Annie. In addition to being a motherly figure of affection and care, she is also the source of wisdom in Lora’s household. (Richard 2008) Both the novel and the film adaptation share a striking resemblance in themes of romance. At the end of the novel, a triangular love develops between Bea, Flake and Jessie. Similarly, the movie also projects similar storyline where Suzie in her teenage is enamored by Steve who is Lora’s fiance. This modernist woman’s picture has been a source of much controversy in both the novel and the movie. It has given rise to a lot of feminist speculations regarding the ordeals faced by single working mothers in male dominant societies. The melodramatic imagination of the filmmaker goes beyond the confines of the novel. The cinematic experience of Imitation of Life presents a spectrum of diverse interpretations which are not fully realized in the novel. It can be stated without an iota of doubt that the freedom of expression in any moving medium is utilized to its fullest potential by the director, all within the permissive limits of the reel world. Works cited Hurst, Fannie, and Daniel Itzkovitz. Imitation of Life. Durham: Duke University Press, 2004. Sirk, Douglas, and Lucy Fischer. Imitation of Life: Douglas Sirk, Director. Piscataway: Rutgers University Press, 1991. Handzo, Stephen. â€Å"Intimations of Lifelessness. † bright lights film journal 18 (1997) Richard, Cicely A. â€Å"Film Analysis: Imitation of Life. † suite101. com. May 26, 2008. 7 March 2009