St John of the Cross A Mystic for the 21st Century

St John of the Cross A Mystic for the 21st Century Regnum 146874Â   Human beings have always cultivated a desire to meet God, to question him, to know his thoughts, to find out his plans. How to find him? Where can we meet him? In ancient times it was believed that the ideal place would be the peaks of the mountains. All nations had their sacred mountains-meeting places between heaven and earth, the abode of the gods and goal of human ascent-for the Greeks, Olympus; for the inhabitants of Mesopotamia, Ararat; for the Ugarits, the Tzaphon. Israel also shared this belief. Abraham, Moses, and Elijah had their strongest spiritual experiences on the mountains: Moria, Horeb, and Mount Carmel. Saint John of the Cross follows in such a tradition. But how could one consider John of the Cross, a 16th century mystic in the scholastic tradition, as having relevance for the 21st century? McGinn, quoting Henri Bremond states; In short, it is not possible to ignore the mystics without disowning ones self. (McGinn, 30) what I believe John offers is a spirituality th at attempts to transcend oneself, comes out of ones experiences and moves close to divine union by forsaking self in relation to others and to God. Essentially, I believe John develops an existential approach to spirituality which offers a hand for the parched lives in modern society. Known as a great advocate of St John of the Cross, Thomas Merton remarked, [T]hese words I underlined, although they amazed and dazzled me with their import, were all too simple for me to understand. They were too naked, too stripped of all duplicity and compromise for my complexity, perverted by many appetites. (Egan, 62) How difficult is it to understand simplicity? In the 21st century, increasingly so. Our lives have become so complicated and dominated by a cacophony of soundbites, images and false truths that we seem to be further from finding God than ever before. It was the Canticle I glanced at while seated in the school chapel. A joyful piece of poetry full of light and far from the Dark Night of my earlier knowledge of John of the Cross. If ever I needed a sign it was on the feast of St. John of the Cross as I sat taking a deep breath removed from the hectic business of a days work. Oh to be a mystic, shut away from the hustle and bustle of life engaged in prayer, spiritual reading and gentle manual work. Such a view of the life of a mystic I am certain is common, yet far from reality. Sitting reflecting on the life of John of the Cross I was intrigued by how busy he was, how engaged in lifes activity. Further, I became aware of a saint for diaconal ministry and for a personal spirituality based on liberation and freedom. What Martin Heidegger would refer to as anticipatory resoluteness. Heidegger says that the intelligibility of Being-in-the-world expresses itself as discourse (Heidegger, 204) That discourse for John is with God and aids a transformation from self to other. For John, conversion is what the contemplative life is all about.[1] Of course, John came from a family of converts to Christianity, as a converso he descended from Jewish converts to Christianity. While his early family life is well known; the rejection of his father by his noble family for marrying his mother who was of a lowly class, the poverty, destitution and homelessness following the death of his father. It is apt to consider such biographical details to come to an understanding of how he developed a self-sacrificial approach towards life. At fourteen, John took on a job caring for hospital patients who suffered incurable diseases and madness. There is little reward for such tasks. For John he discovered his love of life and of God. Such love of God sustained him throughout his prison experience following his contact with Teresa of Avila and his agreement to join her reform movement. John supported her belief that the Carmelite order should return to its life of prayer. After nine months in prison John managed to escape taking with him his unf inished poetry. Ascent of Mount Carmel and Dark Night of the Soul later became two of his books of practical advice along with A Spiritual Canticle and the Bridegroom Christ. His works were never intended to be published, they were merely aide memoirs to help initially the members of the order and others develop in their love of God. Initially John intended the reader to interpret his poetry for themselves. However, like Jesus before him John was prevailed upon to explain and help others to understand. Indeed, in the prologue to the Ascent John makes reference to others who will be attempting to guide directees towards the summit. He says they understand not themselves and lack competent and alert directors. (Ascent Prologue, 2) In the prologue to the Ascent, John indicates his principal sources: I have to say, or at the least, in that which is most important and dark to the understanding, of Divine Scripture; for, if we guide ourselves by this, we shall be unable to stray, since He Who speaks therein is the Holy Spirit. (Ascent Prologue, 2) While predominantly from the New Testament John makes reference to over 1300 scriptural quotations from almost every book. He seems to have known the Bible from heart and he twists and moves such knowledge of the scriptures with his understanding of life and love of God. Shaped, as it was, by his very experience of life. John bases his entire doctrine upon well-established dogmatic facts; nature of God; nature of man; mans purpose and the means by which one gets there. In the Ascent John begins his climb to the summit of divine union with the dark night, essentially a purge of the sensual self to develop passivity and reception of Gods will into our lives. It is no happy accident that John makes reference to a young Tobias from the Old Testament; (Tobit 6:4-5) In the first (night) he commanded him to burn the heart of the fish in the fire, which signifies the heart that is affectioned to, and set upon, the things of the world; which, in order that one may begin to journey toward God, must be burned and purified from all that is creature, in the fire of the love of God. And in this purgation the devil flees away, for he has power over the soul only when it is attached to things corporeal and temporal. When one considers the materialism and the need now mentality in the culture of todays world a brief reflection upon the need to purge oneself of desire of all things seems ever more pressing. As we anticipate the inauguration of Donald Trump as president of the United States the rise of populism creates an energy and drive which at the same time drives a wedge into society. Ghetto mentality has been seen in Warsaw and we neednt spend too long considering the cause of that or the horrific outcomes. So what fills the void when we exorcise Twitter, Facebook and things of no lasting value? John gives us prayer. However, he insists it is not removed from the rest of life nor is it measured in time or quantity. Instead John gives us a life of prayer to help save us from evil, or at least the inordinate indulging of desires that injures the soul. Nothing is evil in and of itself. It is ones attitude. Todays society has seen an inordinate growth in mindfulness, a need for alternative spirituality and a wholesale rejection of the institutional church, at least in the West. Even Apple load, by default, a Mindfulness App on every iPhone they ship. By July 27th, 2016 they had shipped 1 billion units; one billion souls potentially saved by a single trans global corporation, all in the space of nine years. If only Jesus had met Steve Jobs down by the shores of Lake Galilee. One hundred years previously William James raised the same issues in his Gifford Lectures at Edinburgh University, Varieties of Religious Experience, or that John of the Cross and his interest in psychology and human nature got there 400 years before James? In lecture IX and X James refers to Conversion and a need to transform ones soul from sickness to wellbeing. Ironically, James work was utilised by Alcoholic Anonymous some 25 years after his death to help treat sick souls. (Bevacqua, 440) Ones addiction may be al cohol but there is also a plethora of addictions for which one must seek healing. Egan states: For John of the Cross, the journey of The Ascent of Mount Carmel is but a prelude to the love that blooms in a heart that God has freed. Genuine freedom comes not through ones own efforts-the active nights. For John of the Cross, liberation from disordered attachments comes fully and finally through the purifying contemplative dark nights-the passive nights-that follow on what is described in The Ascent of Mount Carmel (Egan, 67) There truly is nothing new under the sun. Consequently, Johns writings are neither a commentary nor a manual for those who devoted their lives to God in an enclosed convent or monastery. They are for every one of us who seek with a sincere heart the best way to spend our lives on earth. Freedom to be and freedom from is alluded to by Johns Ascent of Mount Carmel and his Dark Night of the Soul. According to St John [H]uman nature can never attain to the ontological status of Being Itself inasmuch as it can never assume the divine nature (even while participating in it), the perpetuity of its becoming -that-always-verges-on-being remains an inviolable aspect of its created nature. Mondello, 2) Simply put, we are always moving towards God (or away from), we can never Be God, or attain divine unity. Within existentialism Mahon OBrien argues for the structural and thematic coherence of Heideggers movement from authenticity to the search for an authentic free relation to the world as captured by the term releasement. By demonstrating the structural and thematic unity of Heideggers thought in its entirety, OBrien paves the way for a more measured and philosophically grounded understanding of the issues at stake in the Heidegger controversy. (OBrien, 119) In respect of St John detachment is grounded in his desire for self-sacrifice. It is simply the attitude that makes us value things in their true light before God and use them as He intended. For John the ontological is deeply radicated in the eschatological. Becoming is inexhaustible, for becoming, as such, occurs in eternity. Does John attain the summit? It would be most unlike his character to admit so. Detachment is necessary in, did ministry or indeed in the lives of all Christians. Who is my God? That which is worshipped in the temple of Mammon situated in a shopping centre near each of us? Or the one true God revealed in the scriptures? It is in the prophet Zephaniah that the word poor is used with a new connotation: it indicates not only as a social and economic situation but, above all, an inner religious attitude. For Zephaniah, poor is he who, having no security, trusts entirely in God and submits to his will. John offers us a window through which to gaze at the mountain, but we, as being s in the world, must take the steps to climb that mountain. There is no doubt that St John of the Cross must be read repeatedly and frequently. As a mystic he experienced lifes truly hard knocks, he lived his life in service of God and found love of God in doing for others. If there was ever a sign I received in November 24th 2016 then it was to begin to discover the depth and reality of John, and in doing so I share in some small way the incredulity of Thomas Merton who despite his deep desire to know John found his words, all too simple for him to understand. Saint John has the final word if anyone is seeking God, the Beloved is seeking that person much more. (LFL 3.28) Bibliography Abbreviations Saint John of the Cross Ascent Ascent of Mount Carmel LFL The Living Flame of Love Bevacqua, Tony, (2010). William Jamess sick-minded soul and the AA recovery paradigm: Time for a reappraisal. The journal of humanistic psychology: 50, (4): 440 Egan, KJ 2007, Thomas Mertons Approach to St. John of the Cross, Merton Annual, 20, pp. 62-78 James, William, (2012) The Varieties of Religious Experience: A Study in Human Nature. Oxford, Oxford Worlds Classics Kavanaugh, Kieran and Rodriquez, Otilio (Eds.) The Living Flame of Love 1.1; 1.3; and The Spiritual Canticle B, 29.3 in The Collected Works of Saint John of the Cross, rev. Washington, DC: Institute of Carmelite Studies, 1991. McGinn, Bernard The Mystical Tradition, in Woods, Richard and Tyler, Peter.(2012) The Bloomsbury Guide to Spirituality, London: Bloomsbury, 30 41 Mondello, Geoffrey (2010) The Metaphysics of Mysticism:Toward a Theory of Cognitive Transcendence OBrien, Mahon, (2011) Heidegger and Authenticity: From Resoluteness to Releasement, London: Bloomsbury [1]. See The Living Flame of Love 1.1; 1.3; and The Spiritual Canticle B, 29.3 in The Collected Works of Saint John of the Cross, rev. ed., eds. Kieran Kavanaugh and Otilio Rodriquez (Washington, DC: Institute of Carmelite Studies, 1991).

Whats Medicaid And Medicare Reimbursement Health And Social Care Essay

What is Medicaid and Medicare reimbursement. In this paper you will see a glance of funding issues each province has when working with reimbursement issues. The Medicaid plan administered by single provinces but besides involves federal support and is the beginning of medical coverage for low income patients. In Georgia the population wellness direction plan was implemented to measure growing in wellness attention outgos. A non-experimental attack was used to analyse claims informations from Georgia Medicaid for all plan eligible individuals for each relevant clip period ( purpose to handle footing ) . The economic impact of reimbursement is outstanding in mention to existent cost and Medicaid cost tendencies.Introduction:Medicaid disbursement represents 15 per centum of all US wellness attention disbursement. In financial twelvemonth 2007, national Medicaid plan outgos were $ 332.2 billion, with 43 per centum ( $ 142.6 billion ) borne by provinces. Entire Medicaid plan outgos are projected to increase $ 673.7 billion by 2017 at the rate of 7.9 per centum Pr twelvemonth ( Truffer, CJ, 2010 ) . Medicaid disbursement ranks 2nd among all costs in many province budgets, accounting for 17 per centum of province budgets on norm ( Wildason DE. 2010 ) . Since the state is confronting terrible budget shortages and the growing of Medicaid disbursement is increasing many provinces have adopted cost salvaging such as decreases in supplier payments, coverage and has increased cost sharing with the enrollees. Some provinces have get downing carry oning analyzes to foretell outsourcing Medicaid reimbursement to managed attention organisations ( MCOs ) , negot8iating a planetary rate per member per month ( PMPM ) . One scheme used which is increasing is the aiming of high-cost chronically ailment or handicapped subset of the Medicaid population as execution of a disease direction ( DM ) plan to better wellness results while incorporating cost ( Flowers, L, 2010 ) . The public presentation indexs of the DM plans typically include: ( 1 ) Overall cost nest eggs ( normally based on the sum spent PMPM as compared to some baseline tendency ) ( 2 ) Component cost nest eggs ( decreases in exigency room visits or hospital admittances, as compared to the baseline and ( 3 ) Tax return to investing ( which accounts for plan costs every bit good as medical nest eggs ) . However, grounds of the effectivity of these plans within either Medicare or Medicaid populations is assorted ( Gillespie JL, 2003and Bott, DM, 2009 ) . Although DM plans target persons with specific diseases, surveies of more planetary population wellness direction ( PHM ) plans aiming clinically and socially complex disabled section of Medicaid populations are thin.MethodThe Georgia Department of Community Health contracts with 2 private sector DM sellers to organize and present population wellness outcomes direction services, the plans service the aged, blind, and handicapped population in different parts of the province. This survey focuses on the plan covering Atlanta and North Georgia. Sevenn diseases were targeted for direction ( asthma, chronic clogging pneumonic disease, congestive bosom failure, coronary arteria arteria disease, diabetes, haemophilia, and schizophrenic disorder ) , the plan result and fiscal inducements are tied to overall cost and quality results for all eligible enrollees, irrespective of disease or comorbidity. Georgia paid the North Georgia vendor a $ 13.94 PMPM capitation payment. Medicaid members enrolled in the plans received a wide array of attention services, a 24/7 nurse advice line, educational services, and member/provider analysis utilizing use and claims informations. The nucleus of the intercession squad is the registered nurse â€Å" wellness manager, † but the squad besides includes societal workers, druggists, mental wellness professions, and supplier engagement staff. Georgia ‘s proposed Balancing Incentives Program will be used to further spread out the usage of community-based long term attention services through the followers: aˆ? Expand the figure of slots in Georgia ‘s five 1915 ( degree Celsius ) Medicaid Waiver Programs aˆ? Provide an addition in reimbursement for paediatric place wellness services, thereby increasing entree to home-based, station ague services and cut down yearss spent in the infirmary aˆ? Fund three new community-based services for Medicaid receivers with serious and relentless behavioural wellness demands. The services have been proposed through State Plan Amendment. aˆ? Expand intensive community-based services to youth with serious emotional perturbations and their households. aˆ? Expand the Georgia Pediatric Program ‘s Medically-fragile Day Care service through slot enlargement and age enlargement. aˆ? Adopt Georgia ‘s 12 Aging and Disability Resource Centers as the primary point of entry for place and community services aˆ? Provide web-based preparation on community-based long term attention services available to targeted referral beginnings. The proposed budget for Georgia ‘s Balancing Incentives Program is $ 19,086,355 per twelvemonth, or a sum of $ 57,259,065 over a three-year period. Activities will get down instantly upon presentment of an award with development of statewide developing toward a no-wrong-door point of entry attack, with a focal point of entry through the Aging and Disability Resource Centers. The first five slug points above are designed to significantly spread out the usage of place and community services, cut downing the hazard of institutional attention for several diverse populations necessitating long term attention.Georgia ‘s Balancing Incentive ProgramUnderstanding of Balancing Incentives Program Aims: Since 2008 Georgia has participated in the Money Follows the Person Demonstration Grant, set uping a statewide system of passage coordination to help occupants of establishments in safely returning to their places and communities. In 2007 the State ‘s Medicaid expenditures for place and community based services ( HCBS ) comprised 30.7 per centum of entire long term attention dollars spent yearly. Georgia ‘s Money Follows the Person ( MFP ) Program has successfully transitioned 737 persons from skilled nursing and intermediate attention installations into community abodes and helped spread out the usage of community services, rebalancing the long term attention expenditures for HCBS to 40.9 % by 2010. One facet of the long term support and service system that Georgia has non yet been able to accomplish is a individual point of entry for all community-based services and plans. Entry into Georgia ‘s long term attention plans remains slightly disconnected with many poin ts of entry, some easier to happen than others. Progress toward a no-wrong-door attack was achieved in 2011 when Georgia funded a service, options guidance, provided through an interagency understanding with the State Unit on Aging. Today options guidance is provided through the Aging and Disabilities Resource Centers in all twelve regional Area Agency on Aging in Georgia, supplying direct face-to-face aid to any nursing place or ICF occupant to find available resources and services necessary to ease a successful, sustainable passage. Options Counselors provide the first contact with persons identified for inclusion in the Money Follows the Person Program and serve as a referral point for nursing installation staff as nursing place occupants self-identify for community passage through usage of the Minimum Data Set ‘s Section Q. Further, Options Counselors provide passage aid regardless of purpose to take part in the MFP Program, type of service demand, age or income degree. Despite this work, Georgia still operates several p oints of entry into LTSS, typically determined by population, disablement or type of service required.Current System ‘s Strengths and Challenges:As described above, Georgia ‘s Aging and Disability Resource Centers are more widely recognized by the populace, supplier community and the medical attention system than they were merely a few old ages ago because of outreach attempts by the AAAs, the State Unit on Aging, the State Medicaid Agency and the State ‘s Developmental Disability Agency. Part of the community acknowledgment stems from a big resource database maintained by the ADRCs that presently houses over 24,000 service resources for older grownups, grownups with disablements and persons with developmental disablements. This electronically-maintained resource database relies on parts that are regionally added and maintained by the AAAs. Each part employs information system staff who develop, update and keep the database. Therefore, all information is continually checked for contact truth and any needful alterations to the services offered. One challenge of the system is its labour-intensive theoretical account, utilizing information staff to look into and update resources. BIP Program support is exp ected to supply extra resources for the enlargement of the bing Resource Database targeted toward services specific to populations non antecedently targeted. Another strength of Georgia ‘s LTSS is its traditional usage of conflict-free instance direction. In three of the five release plans a demand of instance direction registration is the absence of association with a service bureau, an association that could function as a focussed referral point for LTSS. Georgia plans to develop construction for struggle free instance direction for the other two release plans and the other plans included in the Undertaking: community mental wellness services provided through the rehabilitation option and the Georgia Pediatric Program in-home nursing service. Since neither has included a conflict-free instance direction service in the yesteryear, this is expected to show a development challenge.Outreach and Ad:Outreach to populations in demand of long term attention has been a long clip chal lenge in Georgia. Georgia ‘s Money Follows the Person Program uses the undermentioned attacks to make out to persons in demand: aˆ? Printed stuffs such as circulars and booklets aˆ? Outreach to aim audiences: referral beginnings such as infirmaries and doctors, nursing installation staff ; older grownup groups, and protagonism organisations aˆ? Education through web sites Funding Plan: Georgia will go on to bespeak province support to fit federal Medicaid financess in order to spread out place and community services through the Balancing Incentive Plan. For more specific information on support, delight refer to the Budget Narrative contained in a separate papers.Challenges:One important challenge in Georgia will be the multiple electronic information systems built to suit points of entry. Over clip organisations in Georgia have independently developed population-specific or program-specific points of entry every bit good as electronic clinical record systems. These systems have evolved over decennaries affecting important province, non-profit-making and private resources. In some plans, there are no bing electronic record-keeping systems. To extenuate this challenge, the ADRCs began working with assorted entry points for developmental disablement services and over clip have expanded the ADRC staff expertness and resource database to include this population. Through its MFP Program Georgia has begun researching engineering options that could supply a platform for transportation of information from multiple electronic recordkeeping systems.Other Balancing Enterprises:As noted antecedently, Georgia was one of the first provinces to be awarded a Money Follows the Person Grant by CMS. Additionally, Georgia is runing one of the presentation releases for kids with terrible emotional upsets to avoid the usage of psychiatric residential intervention installations whenever possible. Technical Aid: Expectations for petitions for proficient aid autumn in the countries of: 1 ) Adopting a standardised, validated paediatric appraisal tool for kids at hazard of hospitalization or institutional long term attention because of delicate medical conditions 2 ) Researching an information engineering platform to ease the transportation of informations electronically for intents of functional and fiscal eligibility for long term attention. Long Term Supports and Services Expansion/Access to Service The followers is a description of the countries of Georgia ‘s Medicaid HCBS plans that will be expanded in assorted ways to supply extra services, serve extra Georgians, or heighten entree to services. aˆ? Expand the figure of slots in Georgia ‘s five 1915 ( degree Celsius ) Medicaid Waiver Programs. The enhanced federal lucifer available through the Balancing Incentive Program will increase admittances to the Elderly and Disabled Waiver Program, the Georgia Pediatric Waiver Program for medically delicate kids, the two Waiver Programs for people with developmental disablements, and the Waiver Program for immature grownups with terrible physical disablements. aˆ? Provide an addition in reimbursement for paediatric place wellness services, thereby increasing entree to home-based, station ague services and cut downing yearss spent in the infirmary. Georgia ‘s place wellness attention rates for station ague skilled services presently offer no derived function in rates for grownup attention and the attention of kids. Home wellness suppliers report a deficit of paediatric nurses, physical and occupational healers available to supply the attention ; therefore, worker deficit consequences in higher costs. In add-on to the higher cost of attention related to the labour market, paediatric place wellness attention is non provided every bit often as that for grownups with greater geographic distances involved in attention proviso. aˆ? Fund three new community-based services for Medicaid receivers with serious and relentless behavioural wellness demands. The services are being reviewed at this clip through State Plan Amendment. If approved by CMS, the new services will offer instance direction, rehabilitation-targeted employment services, and community life supports to persons with serious and relentless mental unwellness. BIP financess will besides be used to spread out Assertive Community Treatment and a rural theoretical account of Assertive Community Treatment for non-urban countries of Georgia. aˆ? Expand the Georgia Pediatric Program ‘s Medically-fragile Day Care service through slot enlargement and age enlargement. Georgia ‘s Pediatric Waiver plan offers medically-fragile twenty-four hours attention to kids who qualify through medical necessity finding. At this clip, Program eligibility is limited to kids age five or younger. There is a demand to spread out the age eligibility limitations, supplying after school attention for medically delicate kids who attend school but need after school attention. Budget Items to Support Balancing Incentive Program Requirements: The followers is a description of the programs for conformity with the demands of the Balancing Incentive Program and the budget deductions with budget projections if known. aˆ? Adopt Georgia ‘s 12 Aging and Disability Resource Centers as the primary point of entry for place and community services: Facilitate the add-on of services and resources specific to populations non presently included in the 24,000-service database. This enlargement of the ADRC resource database is expected to necessitate an increased figure of ADRC staff or may necessitate contracts with other points of entry for cross referral and coordination of resources. aˆ? Provide web-based preparation on community-based long term attention services available to targeted referral beginnings: Will necessitate that the Medicaid Agency purchase or subscribe to a web-based preparation bundle to suit 150 – 200 participants in on-line preparation Sessionss for the intent of cross-referral and communicating between points of entree. aˆ? Develop an outreach program and stuffs in order to raise consciousness of Georgians about the handiness of options to institutional attention. A preliminary Communication Plan includes media releases and articles, booklet and posting printing, societal media posters, and website hosting. The budget for communications is projected to be $ 150,000. aˆ? Development or purchase of an information engineering system designed to ease communicating between assorted province bureaus and other points of participant entree and eligibility finding. The State Medicaid Agency is researching the usage of the eligibility system scheduled for execution in 2014 as the platform through which approved spouses will portion demographic, fiscal and functional information for the intent of eligibility finding. An extra map of the system is that of informations sharing during cross-referral to avoid applicant confusion and facilitate admittance to service without duplicate of informations aggregation.

Credit Risk And The Financial Crisis Finance Essay - Free Essay Example

Sample details Pages: 6 Words: 1943 Downloads: 8 Date added: 2017/06/26 Category Finance Essay Type Argumentative essay Did you like this example? Managing credit risk and the financial crisis are very closely related to each other. To understand this I would first like to give a simple definition of credit risk: The risk that an issuer of debt securities or a borrower may default on its obligations, or that the payment may not be made on a negotiable instrument. Don’t waste time! Our writers will create an original "Credit Risk And The Financial Crisis Finance Essay" essay for you Create order The financial crisis is believed to be caused by factors involving credit. First Im going to explain what caused the financial crisis, second how credit risk management failed in the financial crisis and last what could be done to prevent this failure in credit risk management in the future. Causes of the Financial crisis 2008: The Financial Crisis is believed to be caused by many different factors in both the housing market en the credit market. Although the biggest cause lies by the housing market and the mortgages that involves it. One of the biggest problems with the mortgages was the issuing of the high-risk mortgages. When the housing market in the USA was booming around 2006, it was very easy for people to get a loan. Because of the good conditions of the economy, banks lent out more and more money to higher-risk borrowers. A few examples of the higher-risk mortgages are adjustable rate mortgages and the payment option loan. The adjustable rate mortgage allows people to pay the interest rate over the mortgage on an initial period. The payment option loan is when the borrower can pay the interest it wants, but any interest not paid is added to the principle. Also the guidelines for getting a mortgage changed significantly. Because the banks wanted to make more and more money on mortgages in this housing boom, they loosened the guidelines for qualifying for a mortgage more and more. First the guidelines were changed so that you wouldnt need proof of income. You just needed to show that you have money in your bank account. Then the guidelines changed that you didnt need proof of employment anymore. You just needed to state that you were employed and show that you had money in your bank account. However, after the peak in 2006, the housing market began a decline. This meant that house prices dropped and interest rates were rising. As a great deal of mortgages that were loaned out during the boom were adjustable rate mortgages, this meant that people were starting to pay higher interest. Maybe a higher interest that they could not afford and didnt think of when taking the loan. Also because of the drop of house prices, many homes were worth less then their mortgage. This caused banks to enter foreclosures on a lot of houses. The result of all this was consumers having less purchasing power, private financial systems unwillingly to lend out money, tightening credit and thus decline in economic growth. Failure in indentifying credit risk: Multiple failures in risk management are recognized when looking at the financial crisis. Both the government and private institutions failed in identifying risk Government The government had enabled certain policies that could make mortgages such as adjustable rates mortgage possible. In 1982 it passed the Alternative Mortgage Transaction Parity Act, that allowed adjustable mortgages to be written. These were higher risk mortgages and no regulations were enabled to prevent a crisis. Also investment banks and hedge funds were playing a more and more important role in the economy. They had become almost as important as commercial banks when lending out money, but were not subjected to the same regulations. They were providing loans, but didnt have the same cushion to absorb loan defaults (when a loan is not paid). The government should have indentified this risk and regulate these problems. Thus a failure in risk identification. Central Bank: The central bank may have contributed to the financial risk by actions it had done earlier this decade. In that time the Central Bank enforced a policy that made interest rates drop. It enforced this policies, because it indentified a risk of deflation after the dot-com bubble and 9/11. It seems that the Central Bank had misperceived the rate of inflation as it seems that the measured inflation was below the true inflation. This was one of the reasons of the housing bubble. With interest rates that low, the adjustable rate mortgages seemed very attractive to people. Seeing the problem of the low inflation, the Central Bank enforced a policy that increased interest rates between 2004 and 2006. This caused the adjustable rates mortgages to become expensive and more difficult for homeowners to pay. The Central Bank did not indentify credit risk at the right moments. When increasing and decreasing the interest rates it had not taken sufficient factors in account. It should have indentified the market for adjustable rates mortgages and the credit risk that involved it. Investment banks and commercial banks: Investment banks and commercial banks obviously failed in identifying credit risk. The management in the companies was focused on short-term incentive rather than the long-term obligations. Managers often were rewarded if they assembled financial products. This type of management led to a company culture that focuses on the short-term high risk and the high returns that come with that. This type of management led to the many defaults of the adjustable rate mortgages. Banks should have identified the long-term risk that came with adjustable rate mortgages and thus failed to identify credit risk. How can credit risk be improved in the future? Based on the failures with banking and the recession it has led to, there are four main points that can commercial banks can improve regarding credit risk management. These four are: Company culture, structure and policies Credit analysis Credit risk management Reporting and monitoring Company culture, structure and policies At first companies must establish or improve their risk managementboard committee. Establishing is not enough, the board must be effective, containing experienced workers. The committee must make sure that the company policies about credit risk is effective. It must make sure the company sets certain limits that prevents defaults. Certain risk policies such as scenario-based risk limits and setting risk tolerance levels could be a good way to do it. Second the communication between the board and managers must be very good. That way rules and policies can be adapted much quicker and managers can report more easily to the board, providing better information. Credit analysis Credit risk management cant be done without the right information. Gathering the information seems to be the first step in risk management as it seems that without the right information, even the most advanced credit risk analysis systems are useless. Thats why its very important to collect the right data and maintain it good way. Information that is critical for credit risk management is: borrower financial statements, credit ratings, background checks, ratio analysis, collateral values, and borrowing-base analysis. This information about the borrower is very important and must be updated frequently. Making the right analysis with the right data help risk management in improving decisions and thus improving capital, reserves and liquidity. Credit risk management The management must make decision that will improve the company. Therefore they play a very important role in the company. The management must use the credit information and analysis models in order to get to such decisions. When the credit analysis is done in a correct manner, management must make decision about the following: Credit granting Credit pricing Borrower and portfolio limits Loan reserves and capital Risk transfer The decisions directly affect a companys risk/return profile. Therefore its important that management is improved as much as possible in order to prevent a future failure in credit risk management. Improving management takes a lot of time and recourses. In the short-term it doesnt look very attractive to constantly be on the lookout for changes in management. But it the long-term it seems to be more effective. Reporting and monitoring Reporting is a very important role in credit risk management. This can improve the communication between the management and the board that can improve effectiveness of the credit risk management of the company. Examples of such reporting can be: loan loss ratios, risk-adjusted profitability measures, unexpected charge-offs or earnings volatility due to credit exposures, exceptions to credit policies and limits, and so on. Reporting could be made more efficient by improving the processes by which reporting is done. One way could be improving the technology by which reporting is done. Manual reporting are inefficient and could contain errors. Making the process more automated could improve both credit risk management and operational risk management Example of failure in risk management Subprime mortgage crisis In August 2007, the firm closed its subprime lender, BNC Mortgage, eliminating 1,200 positions in 23 locations, and took an after-tax charge of $25 million and a $27 million reduction in goodwill. Lehman said that poor market conditions in the mortgage space necessitated a substantial reduction in its resources and capacity in the subprime space.[42] In 2008, Lehman faced an unprecedented loss to the continuing subprime mortgage crisis. Lehmans loss was a result of having held on to large positions in subprime and other lower-rated mortgage tranches when securitizing the underlying mortgages; whether Lehman did this because it was simply unable to sell the lower-rated bonds, or made a conscious decision to hold them, is unclear. In any event, huge losses accrued in lower-rated mortgage-backed securities throughout 2008. In the second fiscal quarter, Lehman reported losses of $2.8 billion and was forced to sell off $6 billion in assets.[43] In the first half of 2008 alone, Lehman stock lost 73% of its value as the credit market continued to tighten.[43] In August 2008, Lehman reported that it intended to release 6% of its work force, 1,500 people, just ahead of its third-quarter-reporting deadline in September.[43] On August 22, 2008, shares in Lehman closed up 5% (16% for the week) on reports that the state-controlled Korea Development Bank was considering buying the bank.[44] Most of those gains were quickly eroded as news came in that Korea Development Bank was facing difficulties pleasing regulators and attracting partners for the deal.[45] It culminated on September 9, when Lehmans shares plunged 45% to $7.79, after it was reported that the state-run South Korean firm had put talks on hold.[46] On September 17, 2008 Swiss Re estimates its overall net exposure to Lehman Brothers as approximately CHF 50 million.[47] Investor confidence continued to erode as Lehmans stock lost roughly half its value and pushed the SP 500 down 3.4% on September 9. The Dow Jones lost 300 points the same day on investors concerns about the security of the bank.[48] The U.S. government did not announce any plans to assist with any possible financial crisis that emerged at Lehman.[49] The next day, Lehman announced a loss of $3.9 billion and their intent to sell off a majority stake in their investment-management business, which includes Neuberger Berman.[50][51] The stock slid seven percent that day.[51][52] Lehman, after earlier rejecting questions on the sale of the company, was reportedly searching for a buyer as its stock price dropped another 40 percent on September 11, 2008.[52] Just before the collapse of Lehman Brothers, executives at Neuberger Berman sent e-mail memos suggesting, among other things, that the Lehman Brothers top people forgo multi-million dollar bonuses to send a strong message to both employees and investors that management is not shirking accountability for recent performance.[53] Lehman Brothers Investment Management Director George Herbert Walker IV dismissed the proposal, going so far as to actually apologize to other members of the Lehman Brothers executive committee for the idea of bonus reduction having been suggested. He wrote, Sorry team. I am not sure whats in the water at Neuberger Berman. Im embarrassed and I apologize.[53]

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