Anthropology Concepts Derived from Functionalism and Culture

Anthropology Concepts Derived from Functionalism and Culture Malinowski: His approach to anthropology was based on functionalism and culture. Functionalism ascribes meaning, function, and purpose to the elements within a whole. Culture defines that whole, and it constitutes the entity in which the various functional elements act and are interdependent. Malinowskis understanding of functionalism was in large part derived from a system of balanced reciprocity that he observed while conducting fieldwork. This system is known as the Kula Ring and involves annual inter-island visits between trading partners who exchange highly valued shell ornaments. The goods used in Kula exchanges consist of two types: necklaces (soulava) and armbands (mwali). Neither trade item is particularly well made or crafted of rare materials. He inferred that the principal motivation for the enormous expenditure of time and effort involved in Kula expeditions to be non-utilitarian. In the system, each participant is linked to two partners. One partner trades a necklace in return for an armband of equivalent value. The other makes a reverse exchange of an armband for a necklace. While each Kula partner is tied to only two other partners, each contact has an additional connection on either end of the distribution chain. This eventually forms the Kula Ring and this links more than a dozen islands over hundreds of miles of ocean. Malinowski reasoned that the expense and preoccupation with Kula trade must be functional in nature and most likely served to solve fundamental spatial problems in the Islanders lives. He argued that Kula Ring served three functions in Trobriand society. First, it serves to establish friendly relations among the inhabitants of different islands and maintain a pattern of peaceful contact and communication over great distances with trading partners who might or might not speak the same language. It provides the occasion for the inter-island exchange of utilitarian items. These utilitarian items are shipped back and forth in the course of Kula expeditions. Finally, they reinforce status, since the hereditary chiefs own the most important shell valuables and it is their responsibility for directing ocean voyages. Sahlin Second, symbolic objects and gifts have long been recognized as a form of interartion that can create meaning for group memebers, especially in terms of fostering connection among group memebers or between groups. Polanyi (1944) and Sahlin (1972) showed how, until very recently in human history, was not about gaining profit but about forging and maintaining group solidarity. Marcel mauss: To give, to accept, and to reciprocate. Door Janet T. Landa Malinowski rejected the notion that Kula gift exchanges were motivated by economic considerations. Rather, Malinowksi emphasized that the motives were social and psychological. Thus began a long debate among anthropologists attempting to to unravel the puizzle of the Kula ring. As a result of subsequent work by anthropologists, a view began to crystallize that the instrumental function of the Kula Ring was the creation op political order via the creation of networks of alliances among stateless societeies so as to facilitate commercial trade. This view, implicitly or explicitly, attributed an underlying economic function to Kula gift exchanges and did much to explain a major puzzle of the Kula ring. The anthropological viewpoint – that the Kula gift exchange system creates primitive laws and order in a stateless societies – is consistent with modern PR PC theory, which emphasizeds the importance of institustions in facilitating exchange. Richard Posner (1980) in his ins ightful paper on the economic functions of institutions of primitive societeies, explains the Kula ringa as an institution that facilitated trade. Quoting Belshaw (1965), Posner says: â€Å" The Kula itself wsa not oriented to mindividual trade in ints ceremonial activities. But alonghside the kula persons visiting theru partners took advantage of the oppurtunities to engage in trade. Malinoswki makes point that kula partners would exchange gifts of a trade character in addition to vaygu ‘s (the ornamental objects exchanged in the kula ring), and the szecurity afforded by the partenership would make it possible for the visitor to make contact with other persons in the village and trade with them. An explanation of the Kula ring in terms of its role in facilitating trade, while explaining the major puzzle of the kula ring, leaves unanswered tow other major puzzles of the kula ring – not explained by anthropologist or anyone else. The two puzzled, which this paper will attempt to explain, are 1. Why is the Kula trade organized in the form of a ring of connected partners? and 2. why in the kula ring are there two different ceremonial goods circulating in opposite directions perceptually around the ring? In this chapter we on PR-PC theory of the economics od signaling to develop a theory of the Kula ring that will unravel the Kula puzzles. Fundamental to our theory of the Kula ring is the assumption that transaction costs are positive. The emphasis on the importance of the foundations of modern PR-PC theory and modern monetary theory. Recdently, the insoight that â€Å"institutions matter† in a world with positive transactin costst has been extended to explain certain institutions of primitive societies. The theory of the kula ring presented in this chapter is consisten with the transaction costst approach to intitutions in emphasizing that the kula ring is an institutional arrangement that emerged primarily in orde to economize on transaction costs of intertribal commercial exchange in stateless societies. WAY OF GIVE AND TAKE IN KULA A visiting Kula partner arrives with a â€Å"solicitary gift† (e.g. food) and is given an â€Å"opening gift†, say a necklace, from his host Kula partner, the must be reciprocated woth a counter-gift, an armshell, of equivalent value at a future date. It should be noted that no kula valuables are carried on overseas kula expeditions; the visiting kula partner visits his host partner in order to receive gifts and not to give them. Between any two kula partners, the is an institutionalized delayed reciprocity, involving two opposite kinds of objects. But at the same time, each of these two objects must be passed on in one direction only so that a chain of unidirectional trading kula partners is built up in the kula ring. The global structure of the kula exchange is one that is characterized by cyclical, indirect reciprocation between connected pairs of partners (levi-strauss 1969). Furthermore, a time limit is also prescribed for a recipient of a gift to pass it on to one of his partners: A man who is in the kula, never keeps any article for longer thas, say, a year or tweo. Even this exposes him to the reproach of being â€Å"niggardly† and certain districts have the bad reputationj of being â€Å"slow† and â€Å"hard† in the kula†¦ (Malinowski, 1961). In this Kula gift exchange the equivalence of the closing gift is left to the giver. What are the mechanisms for ensuring that the partners will honor the obligation to reciprocate? Four mechanisms can be identified. 1. Role of â€Å"intermediary gifts†: if a kula partner cannot repay his partner when the latter visits him, he must reciprocate the opening gift with a smaller gift, and â€Å"intermediary gift†, given in token of good faith, which itself must be reciprocated by his partner. Thus the time interval between receiving the opening gift and reciprocating the closing gift is bridged by a series of smaller gift exchanges between Kula partners. 2. Role of reputation: A kula partner who does not repay a gift will eventually lose his reputation and Kula partners. 3. Role of â€Å"give and take† moral code in which the wealthy man is obligated to share wealth: the higher the rank the greater the obligation 4. Role of public magical rites and ceremonial acts: magical rites and public ceremonial acts always accompany an overseas Kula expedition; these rites and ceremonies â€Å"act indirectly on the mind of ones partner and make him soft, insteady in mind and eager to give kula gifts†. Malinowski also suggested the use of sorcery by a kula trader against the defaulting partner. A third set of rules governs membership in the kula ring. Kula exchange is not free exchange between anonymous parties whenever the opportunity arises. Strict rules govern who can enter the Kula ring. To enter the ring, a man must inherit a kula object and magic from his father or mothers brother. Once he obtains a kula object, he can initiate a kula partnership with his fathers or mothers brothers partners or other partners in the kula ring. Once a kula partnership is established, it is a lifelong partnership and is passed on from generation to generation: â€Å" Once in the kula, always in the kula.† Not all East Papuo-Melanasionans in massim, however, can participate in the Kula ring. For example, ceratin â€Å"inferior† sub-clans in Kiriwana are excluded. A man can have few or many partners depending on his rank. A commoner in the trobriands would have a few partners who lived in nearby islands, whereas a chief would have hundreds of partners distributed over several islands. But there is a geographic limit beyond which no kula traders, not even the most influential chief, has any partnerd and the furthest limits of kula partnership are the same for all the memebers of the kula community. Thus, for example, no man in SIneketa has any partners in Kitiva, and no man in S.E. Dobu or Dobu island has Kila partners in Sineketa. Beyond the geographic limit , however, a kula trader still know the mnames of his indirect partners, i.e. the partnersfo his partners.. Participants of the kula ring regard the kula trade as acircular system (Damon 1983). The pattern of kula exchange is ver comples. The simplest structure of exchange would be one in which: If we were to imagin that in the kkula ring, there are many peopke who have only one partern at each side, the the ring would consist of a lartge number of closed circuits, on each of which the same article swould constantly pass. However, the actual structure of the kula exchange is much more complex since Every small kula man , as a a rule, has on one side or the other, the big one, that is a chief. And every chief plays the part of a shunting –station for kula objects. Having so many partners on each side, he constantly transfers an object from one strand to another. EIGEN TEKST (uit boven staande site ge parafraseert) Structure of intertribal commercial trade Anthropologists that studied Malinowskis account of the Kula ring (Campbell 1983; Dalton 1978); Mauss 1979; Sahlins 1969; Uberoi 1971) , feel that Malinowski underestimated the importance of the economical function of the Kula ring, and the way in which it made commercial exchange much easier. Looking closer at the trade process, it is noted that there is a division and specialization of work. Different parties have different specialties for which they are known (e.g. yams, wooden bowls, pots, sago, canoes, etc.), and there is a certain pattern in the different kinds of those finest products that are exchanged between islands in the Kula ring (e.g. yams from the Trobriands against pots from the Amphletts). MAIN POINTS ACCORDING TO MS KOMTER Its all about relationships, social capital. Kula the ring of power, identity/status Identity confirmed by what you receive Will the kula survive ïÆ'   essay question Right of passage Obligations (inner) Generosity ïÆ'   exoectations of return Magic Role of taking risks ïÆ'   negative more important than positive experiences, dare to be courageous. Going through all shit makes you a man. Classical anthropologists and ethnologists like Malinowski, Mauss and Là ©vi-Strauss studied the origins of social order by focusing at a very concrete habit that appears to be wide-spread in archaic society: the exchange of gifts. The principle of give-and-take, or reciprocity, proves to be the main underlying rule, and it is this principle that fulfills a crucial role in creating social ties, trust and community. The exchange of gifts makes possible other types of exchange: of material and nonmaterial goods, services, help and information. These anthropologists not only described the practices of gift giving in great detail but also pointed to their manifold – social, religious, psychological, esthetical, juridical – functions. The functionalist approach exemplified in the work of Malinowski is echoed in Durkheims views on the functions of mechanical and organic solidarity. From the anthropological studies a greater range of possible motives for solidarity can be dis tilled compared to the studies by sociologists. GOOD QUOTES Levi-Strauss: Goods are not only economic commodities but vehicles and instruments for realities of another order: influence, power, sympathy, status, emotion; and the skillful game of exchange consists of a complex totality of maneuvers, conscious or unconscious, in order to gain security and to fortify ones self against risks incurred through alliances and rivalry. Radin 1971: There is no such thing as a free gift Levi-strauss 1969: Exchanges are peacefully resolved wars and wars are the result of unsuccessful transactions.

The Mystic World through Poe’s

The existence of literature is to express humanity and human emotions in or through words. People can feel true and actual human nature through literature. Give a better opening statement about the wonders of literature†¦ Furthermore, people can touch the mystic (not appropriate term) world that is beyond their imaginations by reading literary works. The Tell- Tale Heart by Edgar Allan Poe is a good example for people to look deeply into humanity (why is it a good example?). The short story was first published in James Russell Lowell’s The Pioneer in January, 1843, and it appeared again in The Broadway Journal on August 26, 1845. The story describes the emotions and thoughts of a mad man who killed the old man with the â€Å"evil eye†. The story is plain and simple, yet it is able to arouse and pique the reader’s interest because of the use of symbols and excellent prose.   By reading the story, we could see the dark side of humanity, and how it forms in the human mind The setting of the story covers a period of eight days. The most important action occurs each night around midnight. The location is in the old man’s house and the narrator is the caretaker. The whole story happened and revolved around the old man’s house.   The time frame and the location that Poe established for the story were simple, which further enhanced the shocking images of the characters and its mystery The characters of the story were the nameless and sexless narrator, the old man, and the police. The narrator is nameless and sexless because Poe used â€Å"I† and â€Å"me† to refer to the character. â€Å"Most readers assumed that the narrator is a male because of a male author using a first person point of view.† (give the article title or author and year format, not the URL Available: http:// www.poedecoder.com/essays/ttheart/#characters). However, I think the narrator is a male, because he is strong enough to kill the old man and also because he was able to live with an old man and be his caretaker in the19th century (substantiate more). Poe writes the story in the first person point of view and makes it easy for readers to understand every aspect of the narrator’s mind. Our imaginations are dragged through the narrator’s eyes and we hold our breath as we continue to read the   exciting plot of the murder. It seems that we are just right in the scene watching the narrator killing the old man! Symbols can be found in the story (what other symbols?). The major symbol is the heartbeat. The narrator believes that the sound of the heartbeat is from the old man’s heart, but it is actually from his own heart. The narrator’s fear of being caught by the police and his guilt of killing the old man make him hear the sound of the heartbeat steadily. The old man’s â€Å"eye of a vulture†- â€Å"a pale-blue eye† is the symbol of evil and represents the narrator’s fears. Every time the narrator gazed at the â€Å"evil eye†, his blood ran cold. I think it’s because that the eye reveals the narrator’s evil, dark, and ugly side of his mind so that he wants to kill the old man to get rid of the eye forever (sentence is running in circles). In this way, he can get rid of the fact that he is truly mad and his mind is ugly and evil (how?). The theme of The Tell- Tale Heart is that human nature is a delicate balance of light and dark or good and evil. Most people can keep their balance at most times (give more examples or situations). However, the balance of human nature can be destroyed and the dark side can be aroused by some indefinite (not appropriate term) reasons. Different people view things differently. The reasons that destroy the balance of people’s minds may be different (redundant) In The Tell- Tale Heart, the narrator’s evilness was awakened by the old man’s â€Å"vulture eye†- which really just revealed his own evil. The Tell- Tale Heart is one of my favorite short stories. I read the story for the first time during my first year in the university. When I finished the story, I was really touched and shocked by it. I love the story for its fine descriptions of human nature, the suspicious plot of a murder, and the mystic atmosphere of the story. Every time I read the story, I   imagine myself to be right there in the scene and   to be aware of the strange atmosphere of the story so I can observe a different side of humanity. I can be in another world for a while to experience fear and guilt.   Without a doubt , Poe really is a master at making people experience and explore man’s complexities and emotions. By his stories, one can know more about humanity and the evil that exists in human nature. Literature reveals real humanity and true lives of people. By reading these masterpieces, I understand more about people and experience different sides of the human minds, such as good and evil, or beauty and ugliness. After all, these different and opposite things do exist side by side in our real world and we all have to learn to realize and take them normally and correctly so that we can view our lives in the right and perspective point of view to fulfill our life (I can’t seem to understand what you mean in this paragraph). Works Cited Poe, Edgar Allan. â€Å"The Tell- Tale Heart†.  , 1843. List the cited materials like the url you gave, use proper format

Dmitri Shostakovich Essay

Dmitri Shostakovich was born on September 25, 1906 in St. Petersburg Russia. He was the 2nd of 3 kids from Sofia Kokalouina (pianist), and Dmitri Boleslavovich Shostrakovich (chemical engineer). Dmitri’s mom, Sofia, taught him how to play the piano at age 9, and Dmitri stood out as a prodigy. When Dmitri turned 13 his parents enrolled him in St. Petersburg Conservatory which is where he began to study piano and composition. In 1925 Dmitri graduated from the St. Petersburg Conservatory, and wrote his 1st classical symphony which he named, â€Å"1st Symphony†, as his graduation piece. After Dmitri graduated from the conservatory, he worked as a concert pianist for money and composed pieces in his spare time. Later, after much work, Dmitri managed to win the honorable mention award at the Warsaw International Piano Competition in 1927. After the contest, composer Bruno Walter very much impressed offered to conduct his â€Å"1st Symphony† in Berlin. In 1927 Dmitri finished his â€Å"2nd Symphony† and started working on his 1st opera which he would name, â€Å"The Nose†. In 1930 he finally finished it and premiered it but it turned out to be a failure. It got poor reviews from people like Dmitri Kabalevsky who criticized his music for political reasons. It was so bad that the opera got banned from Russia. Dmitri was devastated and had a nervous breakdown and later had suicidal thoughts, but was treated. Later on Dmitri met a woman named Nina Varzar and married her in 1932. The marriage went well until 1935 when they divorced over a long period of discussions, but later on they got reunited. World War II broke with Germany in 1941 and Dmitri served as a fire warden for a propaganda poster, but he still found time to write his 7th Symphony. This symphony was very popular and served as a form of inspiration for the Russian army. Feeling accomplished Dmitri wrote his 8th symphony which was very different from his 7th. This piece too turned out to be banned from Russia until 1960. In the mid 1940’s Dmitri wrote his â€Å"Violin Concerto No. 1† and it was a success. And in 1949 he composed â€Å"The Song of the Forests† and making Joseph Stalin (Russia’s dictator during the time) â€Å"the great gardener† it was accepted and liked by the people. After Stalin’s death in 1953 Dmitri composed his 10th symphony which was practically dedicated to him. In 1954 Dmitri’s wife Nina died , and he stayed alone for 2 years until he met Margarita Kainova in 1956 and married her, but divorced in 1959. Later on in 1960 Dmitri joined the Communist Party (something he wanted to do since he was very young) but then regretted it. Then in 1962 he married again to a woman named Irina Supinskaya. The fact that their ages differenced by 29 years didn’t matter to them because they stayed together until Dmitri’s death.

Discuss future for the securitization of commercial property - Free Essay Example

Sample details Pages: 11 Words: 3151 Downloads: 6 Date added: 2017/06/26 Category Finance Essay Type Argumentative essay Did you like this example? Commercial property is one of the major sources of business in this competitive world. If we own or rent office space, property costs will be the largest business overhead expenses along with the unknown price movements of these properties due to some micro and macro economic factors such as inflation, GDP, interest rates etc. For these reasons securitization of these assets are given more importance. Commercial mortgage backed securities (CMBS) The CMBS are debt securities that use commercial assets as collaterals and the income obtained by these property assets will be used for paying back the interest and the loans. Property assets are converted into the CMBS by the special purpose vehicle (SPV) and the sale proceeds from these securities will handed over to the original owners. Don’t waste time! Our writers will create an original "Discuss future for the securitization of commercial property" essay for you Create order The CMBS collateral are commonly secured by commercial real estate such as apartment buildings, shopping malls, car parking, warehouse facilities etc. These loans neither recourse to the borrower nor do they form guarantee. Since the borrower looks for repayment, analysis of the cash flows will be very critical. There are thousands of small loans in residential mortgage loans which have a huge competition for the commercial mortgage securities. Main features of the commercial mortgage backed securities. Excellent call protection Reduced credit risk Average life stability Good and supportive collateral Differential time periods for maturity Falling property prices and the rising interest rates may have a negative impact. Property location / local economics for CMBS A geographical dispersion of properties is desired for securitization due to the unexpected price fluctuations in the field of real estate and also builds a very successful portfolio by reducing the risk. It is also recognised by the credit rating agencies by doing so. A 40 % concentration in a single state is considered as significant investments. Multifamily loans: Multifamily loans constitutes 34.5% of the total outstanding commercial real estate loans and are considered to be most desirable because of its short term leases, strong historic credit experience, limited leasing risk, transparent financial reporting. Securities based on Retail property: Retail property ranges from regional malls to community stripe centres. Analysis of relationship between lease rent and the market rent will be very crucial and important task for every investor. An anchored retail property like shopping malls and supermarket are less risky than unanchored retail properties like car parking, corner and open spaces in the malls. Office properties: office properties also form the main sources of the CMBS. Office properties with central business districts will vary from the suburban office properties. Office properties will provide steady cash flows and generally have longer term leases than other property types. Health care and related properties: are also largely operating business and have a different price controls. Properties such as cold storage and car washes are highly credit worthy. Hospitality: it requires a separate underwriting discipline. Occupancy rates will be highly volatile and depends upon consumer travel budget. Composition of earlier CMBS Multifamily 21.9% Hotel 11.2% Ware house /industries 6.5% Nursing 3.3% Mobile home Park -1.3% Retail 27.3% Other 4.4% Benefits of CMBS Lower pricing Improved liquidities Diversification on lenders Non-recourse to parent company Release value while retain future growth potential Off-balance sheet financing Asset backed securities Asset-backed securities are based on pools of underlying assets. These assets are normally illiquid in nature. The pooling of assets will make the Securitization large enough to be economical and to diversify the qualities of the underlying assets. A special purpose trust or instrument is set up which takes title to the assets and the cash flows are passed through to the investors in the form of an asset-backed security. The types of assets that can be securitized range from residential mortgages to trade receivables and even music royalties. The asset-backed security usually qualifies for a top rating and enables the issuing company or bank to raise funds at a very attractive rate, while freeing up capital and retaining customer relationships and servicing revenues. It is very important that securitization of this commercial property is an essence for every investor and they should also familiarize with some common real estate terms: Lease:An areement through which the owner of the property ( the lessor)grants the the right of control to a occpant ( the lessee) over a particlar period ( the term) for a fixed amount of money( the rent). Lien:ÂÂ  A legal claim that which filed against a certain property for payment of obligation. During this ongoing process if a property owner fails to pay a creditor, a lien can halt the sale of a property. Sale-leaseback:ÂÂ  a process of transaction in which an owner sells a propert to an investor , who inturn leases the same property to the same owner undedr prearranged terms. These deals the original owner freed- up capital and tax breaks and here the investor a guranteed appreciation and return. Sublease:ÂÂ  lease which is given by a tenant for some or all of a rented property. For example, if a tenenat rents 50,000 square feet but here he uses only 30,000 squre feet of space , so he thinks to sublet the remaining 20,000 square feet for some or all of the remaining period of the lease, only if they continue to occupy and pay rent for the property. Asset valuation: Asset valuation plays a vital role in determining the value of the underlying securities and enhances the buyer to buy that particlar secrities or not. Sub-prime crisis origin The real estate property is regarded as one of the most valuable asset for individuals. Currently its value became the biggest puzzle over the world economy and financial system. Over the period of time Wall Street built trillions of dollars market for Mortgage Backed Securities (MBS) and sold them worldwide on two commonly-accepted beliefs that the value of the USA real estate would never fall in USA, and people would always able to make their mortgage payments without any defaults. Sub-prime crisis originated in US .US Banks finance companies started lend money to the subprime borrowers who are first time borrowers with low income and poor credit history. With this loan borrowers bought properties. Banks financials bundled this debt converted this debt into Mortgage Backed Securities (MBS) they sell this to investors around the world as they thought that house price will rise continuously. As house prices went-up MBS price shoot-up as well. Later interest rate rise, cheap loans disappeared defaults on the mortgage payment rise heavily resulted in the collapse of the housing bubble in turn resulted in heavy decline in the MBS prices stock market crash around the globe. This made Banks lenders to write-off billions of dollars huge employee lay-offs, loss of millions jobs worldwide. After this cost of borrowing went-up lending became scarce, this affected credit flow around the globe . Financial crisis and Securitization Securitization is the process of collecting different types of debt and loan obligations and packaging them as various types of securities which are sold to investors. The interest and principal on the underlying security will be paid to investors on a regular basis. Securities backed-up by mortgages are called as mortgage-backed securities and securities backed by other types of debt are known as asset backed securities. Below chart explains the process of securitisation. In this context securitization refers to the issue of a financial security backed-up by the assets where the investor has no recourse to the seller of the asset. The typical securitization process has two-step which includes an originator/seller establishing a special purpose entity (SPE). Then the originator/seller sells the assets that will be considered as collateral for the asset-backed securities (ABS) so as to attain true-sale and to consider it as an off-balance sheet item. These assets are normally handed over to a second entity to a qualified SPE (QSPE) or trust that then issues the securities. Two step process is followed to legally separate the collateral from the originator and his general assets. The separation ensures that the assets serves as collateral and cannot be consolidated with the general assets of the originator in the bankruptcy event. Due to bankruptcy remoteness of the assets allows the securitization process to achieve a higher credit rating than that of the originator. The issuer is able to achieve higher credit rating by incorporating varying levels and forms of credit enhancement. Source: Federal Deposit Insurance Corporation (FDIC) Benefits of securitisation Securitization removes the assets from the balance sheet, freeing equity capital. Due to capital relief, more funds available for new credit. Efficient management of capital and asset-liability structure Optimizing YTM for both assets and liabilities. Efficient credit risk and interest rate risk management by creating off-balance sheet items and mitigating sector concentration. Access to new source of funding and a vehicle enhance income and return on assets Below are the subdivisions of the different asset classes and chart showing various types debt. There are 3 main types Asset backed securities. Mortgage-Backed Securities (MBS) Collateralised Debt Obligations (CDO) Asset-Backed Securities (ABS) These main types are again dived into Commercial MBS (CMBS), Residential MBS (RMBS), Collateralised Loan Obligations (CLO), and Collateralised Bond Obligations (CBO). Source: Federal Deposit Insurance Corporation (FDIC) The Wall Street Journal estimated that the impact and size of the subprime crisis is devastating on world economy. This cost more than $4 trillion to the global economy and includes the loss of value of the housing stock that is a result of the credit crunch and this crisis fuelled by securitization. Subprime crisis is the first of its type which is magnified by securitization. Investors bought bundles of mortgages which were so complex in nature. Investors relied upon ratings agencies. Nobody seems to know what these mortgage bundles are worth, how much has been borrowed using the bundles as collateral, who owns them, how deeply their value has declined and what extent the banks capital affected with the resulting write-downs. Some analysts blame it on the securitization of real estate loans rather than the poor credit quality of these loans. The problem is that the credit rating agencies didnt rateÂÂ  these assets then the things started going bad and were very slow to react. Due to deregulation of the financial sector, the banks found new ways of converting debt into tradable instruments and sold those securities to institutions worldwide. To fund these, the banks lent more debt by expecting that the return on the instruments will be normally above their cost of borrowing, so the banks have planned to sell these securities as per the originate and distribute model. The system was difficult to understand for many as what was going on or how these assumptions were justified. As much of the action were recorded only on the banks off balance sheet in a shadow banking system. The very low interest rates in US during 2001-06 were highly profitable to the banks, allowing them to lend more money, expand its volume and improve business. They sponsored hedge funds, private equity buyouts and issued mortgage financial instruments, fresh bonds, and offered lines of credit to their own structured investment vehicles (SIVs). These bets were usually leveraged by extra topping-up of the debt, with some institutions like hedge funds and investment banks borrowed to buy assets worth 30 times of their capital. This is how the 2007-08 crisis became heavily on leveraged concerns often and indebted to one another. The central banks around the world gathered huge amount to rescue the banks from their own folly and the banks were bailed out with huge bail-out packages. The use of tax payers money or public resources to achieve this should carry a price and a lesson and need not to encourage a repetition of moral hazard and such behavior. Future of securitisation Whether securitization played a role in the subprime crisis and credit crunch? In case of MBS where a portion of the coupon is risk-based and represents a premium, which reflects the default risk carried-out by the each borrower. The premium is calculated in such way that a full business cycle has been encapsulated when there exists for the investor a potential credit arbitrage as the risk premium is over-valuated and other times there is no arbitrage opportunity the risk premium is then under-valuated. In first case securities will be attractive due arbitrage opportunity where as in second type they will not. During the latter the products appeal depends on the effectiveness of its credit enhancement and robustness of the cash flows from the junior certificates to the senior ones. If this structure is deficient, the product would lose its appeal and its market would dry up in no time as occurred in this credit crisis. As such, securitization is therefore not to blame in the subprime crisis. Its the in-efficient structuring of the different securities that caused the problem. Now the task is that it should be structured correctly. MBS future is depending upon the product getting immunized against the hazards of the real estates cycle. Credit scoring and rating reflects differences between borrowers and to that extent it ranks them satisfactorily but it dont have ability of expressing the impact on their credit behaviour of a full business cycle. This turns out to be a major defect of any credit rating or scoring. The scoring system turns out to be unable of assessing objectively the risk as the score conflates within single number a consumers credit ability, the good health of the real estate sector as well as that of the global economy. Mortgage-Backed Securities viability would then be determined by the capacity of insurers in that specialized field to absorb the shocks resulting from alternating phases of the business cycle. Securitization models in the future should be priced heavily based upon existing equity rather than existing credit scores. The 3 Cs of credit are: Collateral, Capacity and Character are all important in structuring of the security . Policy changes required for the success of the securitization 1. New model of bank with modern principles of finance is not sustainable Unwillingness of the mortgage banks to analyse the risk profiles of the borrowers and lend on the basis of risk in a regime of low interest rate made financial system very fragile. Many lenders had to relax their credit standards due to competition. And most of the mortgage lenders in the US sell their loans within a month or two, their primary aim was to generate as many loans as they could and then sell them quickly. This was major reason they lacked strong incentives for credit checks. There should be strong policy to curb this kind of activities. 2. Disciplining the rating agencies: Investment bank pays the rating agencies to rate Collateralised Debt Obligations (CDO) securities. Investment banks and rating agencies work closely in structuring the transactions. Rating agency staff crosses over to dark side to work for investment banks. One option is for the government itself to regulate rating agencies. 3. There should be more transparency about the structured products. One reason behind market failure relates to information asymmetry. It is argued that sellers have more information then buyers about what they are selling. In the sub prime episode, Investors increasingly did not know what they were buying and what the security is worth. The following steps are necessary to ensure more transparency about the structured products. Consistent valuation of assets across firms to be ensured by the regulator Dissemination of information on the asset-backed commercial paper, price and performance of privately traded asset-backed instruments. Greater standardization of structured products 4. Capital Cover: Its been argued that subprime default rates would not have spiked if loan originators had been forced to set aside capital to cover say 10% of each securitized pool. The important area which requires reform is accounting, dominated by few large companies and accounting standards, where the mark-to-market approach has been pro-cyclical encouraging the boom-bust cycle. Public audit agency and a diversified accounting standards will be able solve the problems of an industry where auditors are too often in cahoots with the auditee. Likewise allowing only expert publicly owned bodies to work as hedge funds and converting private equity into public equity. The solution to the huge problems explained above is not to abandon finance but to embed them in a properly regulated system and to progressively transform companies and banks in terms of ownership and functioning. The shadow banking system should be controlled effectively and new policies to be followed by all those who offer derivatives. Strict margin requirements to be enforced on all existing and future contracts and a global network of publicly owned Derivatives Boards should be established with a monopoly on derivatives trading. Conclusion The future of the securitisation is very hard to determine in this changing environment. However the study made have suggested some of the ways in which the future for these securities can be safeguarded against the falling prices and increasing rates. Following are the suggestions for protecting the future of these toxic debts. Diversify the investments Build an portfolio of investments Get good rating for securities from rating agencies. However time differentials, lack of prepayment risks and the economics of commercial property security markets will support the growth of the toxic debt in the future. Securitization was a revolution that brought huge gains. The transformation of sticky and immovable debt into something more tradable. As it comes under surveillance, the debate should be about how this system can be improved, not discarded. The challenge before the Fed and worldwide central bankers is to regulate and control securitization without hurting the beneficial outcomes of increased flexibility. The government will need to step in and look at the success of the securitization by bringing in more transparency in the process of securitisation with the below policies and regulations. Credit Rating Organization (CRO) Reform: This should incorporate two main elements. (i) Withdrawing government blessings from their work (ii) improving CRO accountability for ratings decisions Lender Reform: Loan officers compensation must be directly associated to long-term performance rather than to short-term profits. Originators must bond more effectively the quality of the loans they review. Governments can ensure market discipline by assisting in the disclosure of information about contract evolution by encouraging development of better information systems. Improve Government Accountability: For better crisis-management decisions should taken in open debate outside of an actual crisis. Accountability can be improved by regulators by analysing and regularly testing a benchmark plan for crisis resolution. The events of the current crisis confirm that not planning for crises prolongs and deepens the disruption by tempting regulators to subsidize loss-making institutions at taxpayer expense. Regulators need to track market signals to help them to mitigate risk. It is necessary to strengthen the safety net by making authorities more accountable for its costs. This requires the development of a system of fair-value accounting for intangible safety-net subsidies.