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Predatory lending refers to the practice of unscrupulous lenders, enticing borrowers to enter into "unsafe" or "unsound" secured loans for inappropriate purposes. A classic bait-and-switch method was used by Countrywide Financial, advertising low interest rates for home refinancing. Such loans were written into extensively detailed contracts, and swapped for more expensive loan products on the day of closing. Whereas the advertisement might state that 1% or 1.5% interest would be charged, the consumer would be put into an adjustable rate mortgage (ARM) in which the interest charged would be greater than the amount of interest paid. This created negative amortization, which the credit consumer might not notice until long after the loan transaction had been consummated.
Countrywide, sued by California Attorney General Jerry Brown for "unfair business practices" and "false advertising" was making high cost mortgages "to homeowners with weak credit, adjustable rate mortgages (ARMs) that allowed homeowners to make interest-only payments". When housing prices decreased, homeowners in ARMs then had little incentive to pay their monthly payments, since their home equity had disappeared. This caused Countrywide's financial condition to deteriorate, ultimately resulting in a decision by the Office of Thrift Supervision to seize the lender.
Critics such as economist Paul Krugman and U.S. Treasury Secretary Timothy Geithner have argued that the regulatory framework did not keep pace with financial innovation, such as the increasing importance of the shadow banking system, derivatives and off-balance sheet financing. A recent OECD study suggest that bank regulation based on the Basel accords encourage unconventional business practices and contributed to or even reinforced the financial crisis. In other cases, laws were changed or enforcement weakened in parts of the financial system. Key examples include:
Prior to the crisis, financial institutions became highly leveraged, increasing their appetite for risky investments and reducing their resilience in case of losses. Much of this leverage was achieved using complex financial instruments such as off-balance sheet securitization and derivatives, which made it difficult for creditors and regulators to monitor and try to reduce financial institution risk levels. These instruments also made it virtually impossible to reorganize financial institutions in bankruptcy, and contributed to the need for government bailouts.
From 2004 to 2007, the top five U.S. investment banks each significantly increased their financial leverage (see diagram), which increased their vulnerability to a financial shock. Changes in capital requirements, intended to keep U.S. banks competitive with their European counterparts, allowed lower risk weightings for AAA securities. The shift from first-loss tranches to AAA tranches was seen by regulators as a risk reduction that compensated the higher leverage. These five institutions reported over $4.1 trillion in debt for fiscal year 2007, about 30% of USA nominal GDP for 2007. Lehman Brothers went bankrupt and was liquidated, Bear Stearns and Merrill Lynch were sold at fire-sale prices, and Goldman Sachs and Morgan Stanley became commercial banks, subjecting themselves to more stringent regulation. With the exception of Lehman, these companies required or received government support. Lehman reported that it had been in talks with Bank of America and Barclays for the company's possible sale. However, both Barclays and Bank of America ultimately declined to purchase the entire company.
Behavior that may be optimal for an individual (e.g., saving more during adverse economic conditions) can be detrimental if too many individuals pursue the same behavior, as ultimately one person's consumption is another person's income. Too many consumers attempting to save (or pay down debt) simultaneously is called the paradox of thrift and can cause or deepen a recession. Economist Hyman Minsky also described a "paradox of deleveraging" as financial institutions that have too much leverage (debt relative to equity) cannot all de-leverage simultaneously without significant declines in the value of their assets.
During April 2009, U.S. Federal Reserve vice-chair Janet Yellen discussed these paradoxes: "Once this massive credit crunch hit, it didn’t take long before we were in a recession. The recession, in turn, deepened the credit crunch as demand and employment fell, and credit losses of financial institutions surged. Indeed, we have been in the grips of precisely this adverse feedback loop for more than a year. A process of balance sheet deleveraging has spread to nearly every corner of the economy. Consumers are pulling back on purchases, especially on durable goods, to build their savings. Businesses are cancelling planned investments and laying off workers to preserve cash. And, financial institutions are shrinking assets to bolster capital and improve their chances of weathering the current storm. Once again, Minsky understood this dynamic. He spoke of the paradox of deleveraging, in which precautions that may be smart for individuals and firms—and indeed essential to return the economy to a normal state—nevertheless magnify the distress of the economy as a whole."
The term financial innovation refers to the ongoing development of financial products designed to achieve particular client objectives, such as offsetting a particular risk exposure (such as the default of a borrower) or to assist with obtaining financing. Examples pertinent to this crisis included: the adjustable-rate mortgage; the bundling of subprime mortgages into mortgage-backed securities (MBS) or collateralized debt obligations (CDO) for sale to investors, a type of securitization; and a form of credit insurance called credit default swaps (CDS). The usage of these products expanded dramatically in the years leading up to the crisis. These products vary in complexity and the ease with which they can be valued on the books of financial institutions.
CDO issuance grew from an estimated $20 billion in Q1 2004 to its peak of over $180 billion by Q1 2007, then declined back under $20 billion by Q1 2008. Further, the credit quality of CDO's declined from 2000 to 2007, as the level of subprime and other non-prime mortgage debt increased from 5% to 36% of CDO assets. As described in the section on subprime lending, the CDS and portfolio of CDS called synthetic CDO enabled a theoretically infinite amount to be wagered on the finite value of housing loans outstanding, provided that buyers and sellers of the derivatives could be found. For example, buying a CDS to insure a CDO ended up giving the seller the same risk as if they owned the CDO, when those CDO's became worthless.
This boom in innovative financial products went hand in hand with more complexity. It multiplied the number of actors connected to a single mortgage (including mortgage brokers, specialized originators, the securitizers and their due diligence firms, managing agents and trading desks, and finally investors, insurances and providers of repo funding). With increasing distance from the underlying asset these actors relied more and more on indirect information (including FICO scores on creditworthiness, appraisals and due diligence checks by third party organizations, and most importantly the computer models of rating agencies and risk management desks). Instead of spreading risk this provided the ground for fraudulent acts, misjudgments and finally market collapse. In 2005 a group of computer scientists built a computational model for the mechanism of biased ratings produced by rating agencies, which turned out to be adequate to what actually happened in 2006–2008.[citation needed]
The pricing of risk refers to the incremental compensation required by investors for taking on additional risk, which may be measured by interest rates or fees. Several scholars have argued that a lack of transparency about banks' risk exposures prevented markets from correctly pricing risk before the crisis, enabled the mortgage market to grow larger than it otherwise would have, and made the financial crisis far more disruptive than it would have been if risk levels had been disclosed in a straightforward, readily understandable format.
For a variety of reasons, market participants did not accurately measure the risk inherent with financial innovation such as MBS and CDOs or understand its impact on the overall stability of the financial system. For example, the pricing model for CDOs clearly did not reflect the level of risk they introduced into the system. Banks estimated that $450bn of CDO were sold between "late 2005 to the middle of 2007"; among the $102bn of those that had been liquidated, JPMorgan estimated that the average recovery rate for "high quality" CDOs was approximately 32 cents on the dollar, while the recovery rate for mezzanine CDO was approximately five cents for every dollar.
Another example relates to AIG, which insured obligations of various financial institutions through the usage of credit default swaps. The basic CDS transaction involved AIG receiving a premium in exchange for a promise to pay money to party A in the event party B defaulted. However, AIG did not have the financial strength to support its many CDS commitments as the crisis progressed and was taken over by the government in September 2008. U.S. taxpayers provided over $180 billion in government support to AIG during 2008 and early 2009, through which the money flowed to various counterparties to CDS transactions, including many large global financial institutions.
As financial assets became more and more complex, and harder and harder to value, investors were reassured by the fact that both the international bond rating agencies and bank regulators, who came to rely on them, accepted as valid some complex mathematical models which theoretically showed the risks were much smaller than they actually proved to be. George Soros commented that "The super-boom got out of hand when the new products became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility."
Despite the dominance of the above formula, there are documented attempts of the financial industry, occurring before the crisis, to address the formula limitations, specifically the lack of dependence dynamics and the poor representation of extreme events. The volume "Credit Correlation: Life After Copulas", published in 2007 by World Scientific, summarizes a 2006 conference held by Merrill Lynch in London where several practitioners attempted to propose models rectifying some of the copula limitations. See also the article by Donnelly and Embrechts and the book by Brigo, Pallavicini and Torresetti, that reports relevant warnings and research on CDOs appeared in 2006.
In a June 2008 speech, President and CEO of the New York Federal Reserve Bank Timothy Geithner—who in 2009 became Secretary of the United States Treasury—placed significant blame for the freezing of credit markets on a "run" on the entities in the "parallel" banking system, also called the shadow banking system. These entities became critical to the credit markets underpinning the financial system, but were not subject to the same regulatory controls. Further, these entities were vulnerable because of maturity mismatch, meaning that they borrowed short-term in liquid markets to purchase long-term, illiquid and risky assets. This meant that disruptions in credit markets would make them subject to rapid deleveraging, selling their long-term assets at depressed prices. He described the significance of these entities:
The securitization markets supported by the shadow banking system started to close down in the spring of 2007 and nearly shut-down in the fall of 2008. More than a third of the private credit markets thus became unavailable as a source of funds. According to the Brookings Institution, the traditional banking system does not have the capital to close this gap as of June 2009: "It would take a number of years of strong profits to generate sufficient capital to support that additional lending volume." The authors also indicate that some forms of securitization are "likely to vanish forever, having been an artifact of excessively loose credit conditions."
Economist Mark Zandi testified to the Financial Crisis Inquiry Commission in January 2010: "The securitization markets also remain impaired, as investors anticipate more loan losses. Investors are also uncertain about coming legal and accounting rule changes and regulatory reforms. Private bond issuance of residential and commercial mortgage-backed securities, asset-backed securities, and CDOs peaked in 2006 at close to $2 trillion...In 2009, private issuance was less than $150 billion, and almost all of it was asset-backed issuance supported by the Federal Reserve's TALF program to aid credit card, auto and small-business lenders. Issuance of residential and commercial mortgage-backed securities and CDOs remains dormant."
Rapid increases in a number of commodity prices followed the collapse in the housing bubble. The price of oil nearly tripled from $50 to $147 from early 2007 to 2008, before plunging as the financial crisis began to take hold in late 2008. Experts debate the causes, with some attributing it to speculative flow of money from housing and other investments into commodities, some to monetary policy, and some to the increasing feeling of raw materials scarcity in a fast-growing world, leading to long positions taken on those markets, such as Chinese increasing presence in Africa. An increase in oil prices tends to divert a larger share of consumer spending into gasoline, which creates downward pressure on economic growth in oil importing countries, as wealth flows to oil-producing states. A pattern of spiking instability in the price of oil over the decade leading up to the price high of 2008 has been recently identified. The destabilizing effects of this price variance has been proposed as a contributory factor in the financial crisis.
In testimony before the Senate Committee on Commerce, Science, and Transportation on June 3, 2008, former director of the CFTC Division of Trading & Markets (responsible for enforcement) Michael Greenberger specifically named the Atlanta-based IntercontinentalExchange, founded by Goldman Sachs, Morgan Stanley and BP as playing a key role in speculative run-up of oil futures prices traded off the regulated futures exchanges in London and New York. However, the IntercontinentalExchange (ICE) had been regulated by both European and U.S. authorities since its purchase of the International Petroleum Exchange in 2001. Mr Greenberger was later corrected on this matter.
Feminist economists Ailsa McKay and Margunn Bjørnholt argue that the financial crisis and the response to it revealed a crisis of ideas in mainstream economics and within the economics profession, and call for a reshaping of both the economy, economic theory and the economics profession. They argue that such a reshaping should include new advances within feminist economics and ecological economics that take as their starting point the socially responsible, sensible and accountable subject in creating an economy and economic theories that fully acknowledge care for each other as well as the planet.
Current Governor of the Reserve Bank of India Raghuram Rajan had predicted the crisis in 2005 when he became chief economist at the International Monetary Fund.In 2005, at a celebration honouring Alan Greenspan, who was about to retire as chairman of the US Federal Reserve, Rajan delivered a controversial paper that was critical of the financial sector. In that paper, "Has Financial Development Made the World Riskier?", Rajan "argued that disaster might loom." Rajan argued that financial sector managers were encouraged to "take risks that generate severe adverse consequences with small probability but, in return, offer generous compensation the rest of the time. These risks are known as tail risks. But perhaps the most important concern is whether banks will be able to provide liquidity to financial markets so that if the tail risk does materialise, financial positions can be unwound and losses allocated so that the consequences to the real economy are minimised."
The financial crisis was not widely predicted by mainstream economists except Raghuram Rajan, who instead spoke of the Great Moderation. A number of heterodox economists predicted the crisis, with varying arguments. Dirk Bezemer in his research credits (with supporting argument and estimates of timing) 12 economists with predicting the crisis: Dean Baker (US), Wynne Godley (UK), Fred Harrison (UK), Michael Hudson (US), Eric Janszen (US), Steve Keen (Australia), Jakob Brøchner Madsen & Jens Kjaer Sørensen (Denmark), Kurt Richebächer (US), Nouriel Roubini (US), Peter Schiff (US), and Robert Shiller (US). Examples of other experts who gave indications of a financial crisis have also been given. Not surprisingly, the Austrian economic school regarded the crisis as a vindication and classic example of a predictable credit-fueled bubble that could not forestall the disregarded but inevitable effect of an artificial, manufactured laxity in monetary supply, a perspective that even former Fed Chair Alan Greenspan in Congressional testimony confessed himself forced to return to.
A cover story in BusinessWeek magazine claims that economists mostly failed to predict the worst international economic crisis since the Great Depression of the 1930s. The Wharton School of the University of Pennsylvania's online business journal examines why economists failed to predict a major global financial crisis. Popular articles published in the mass media have led the general public to believe that the majority of economists have failed in their obligation to predict the financial crisis. For example, an article in the New York Times informs that economist Nouriel Roubini warned of such crisis as early as September 2006, and the article goes on to state that the profession of economics is bad at predicting recessions. According to The Guardian, Roubini was ridiculed for predicting a collapse of the housing market and worldwide recession, while The New York Times labelled him "Dr. Doom".
Stock trader and financial risk engineer Nassim Nicholas Taleb, author of the 2007 book The Black Swan, spent years warning against the breakdown of the banking system in particular and the economy in general owing to their use of bad risk models and reliance on forecasting, and their reliance on bad models, and framed the problem as part of "robustness and fragility". He also took action against the establishment view by making a big financial bet on banking stocks and making a fortune from the crisis ("They didn't listen, so I took their money"). According to David Brooks from the New York Times, "Taleb not only has an explanation for what’s happening, he saw it coming."
Market strategist Phil Dow believes distinctions exist "between the current market malaise" and the Great Depression. He says the Dow Jones average's fall of more than 50% over a period of 17 months is similar to a 54.7% fall in the Great Depression, followed by a total drop of 89% over the following 16 months. "It's very troubling if you have a mirror image," said Dow. Floyd Norris, the chief financial correspondent of The New York Times, wrote in a blog entry in March 2009 that the decline has not been a mirror image of the Great Depression, explaining that although the decline amounts were nearly the same at the time, the rates of decline had started much faster in 2007, and that the past year had only ranked eighth among the worst recorded years of percentage drops in the Dow. The past two years ranked third, however.
One of the first victims was Northern Rock, a medium-sized British bank. The highly leveraged nature of its business led the bank to request security from the Bank of England. This in turn led to investor panic and a bank run in mid-September 2007. Calls by Liberal Democrat Treasury Spokesman Vince Cable to nationalise the institution were initially ignored; in February 2008, however, the British government (having failed to find a private sector buyer) relented, and the bank was taken into public hands. Northern Rock's problems proved to be an early indication of the troubles that would soon befall other banks and financial institutions.
IndyMac often made loans without verification of the borrower’s income or assets, and to borrowers with poor credit histories. Appraisals obtained by IndyMac on underlying collateral were often questionable as well. As an Alt-A lender, IndyMac’s business model was to offer loan products to fit the borrower’s needs, using an extensive array of risky option-adjustable-rate-mortgages (option ARMs), subprime loans, 80/20 loans, and other nontraditional products. Ultimately, loans were made to many borrowers who simply could not afford to make their payments. The thrift remained profitable only as long as it was able to sell those loans in the secondary mortgage market. IndyMac resisted efforts to regulate its involvement in those loans or tighten their issuing criteria: see the comment by Ruthann Melbourne, Chief Risk Officer, to the regulating agencies.
Typical American families did not fare as well, nor did those "wealthy-but-not wealthiest" families just beneath the pyramid's top. On the other hand, half of the poorest families did not have wealth declines at all during the crisis. The Federal Reserve surveyed 4,000 households between 2007 and 2009, and found that the total wealth of 63 percent of all Americans declined in that period. 77 percent of the richest families had a decrease in total wealth, while only 50 percent of those on the bottom of the pyramid suffered a decrease.
On November 3, 2008, the European Commission at Brussels predicted for 2009 an extremely weak growth of GDP, by 0.1%, for the countries of the Eurozone (France, Germany, Italy, Belgium etc.) and even negative number for the UK (−1.0%), Ireland and Spain. On November 6, the IMF at Washington, D.C., launched numbers predicting a worldwide recession by −0.3% for 2009, averaged over the developed economies. On the same day, the Bank of England and the European Central Bank, respectively, reduced their interest rates from 4.5% down to 3%, and from 3.75% down to 3.25%. As a consequence, starting from November 2008, several countries launched large "help packages" for their economies.
The U.S. Federal Reserve and central banks around the world have taken steps to expand money supplies to avoid the risk of a deflationary spiral, in which lower wages and higher unemployment lead to a self-reinforcing decline in global consumption. In addition, governments have enacted large fiscal stimulus packages, by borrowing and spending to offset the reduction in private sector demand caused by the crisis. The U.S. Federal Reserve's new and expanded liquidity facilities were intended to enable the central bank to fulfill its traditional lender-of-last-resort role during the crisis while mitigating stigma, broadening the set of institutions with access to liquidity, and increasing the flexibility with which institutions could tap such liquidity.
This credit freeze brought the global financial system to the brink of collapse. The response of the Federal Reserve, the European Central Bank, the Bank of England and other central banks was immediate and dramatic. During the last quarter of 2008, these central banks purchased US$2.5 trillion of government debt and troubled private assets from banks. This was the largest liquidity injection into the credit market, and the largest monetary policy action, in world history. Following a model initiated by the United Kingdom bank rescue package, the governments of European nations and the USA guaranteed the debt issued by their banks and raised the capital of their national banking systems, ultimately purchasing $1.5 trillion newly issued preferred stock in their major banks. In October 2010, Nobel laureate Joseph Stiglitz explained how the U.S. Federal Reserve was implementing another monetary policy —creating currency— as a method to combat the liquidity trap. By creating $600 billion and inserting[clarification needed] this directly into banks, the Federal Reserve intended to spur banks to finance more domestic loans and refinance mortgages. However, banks instead were spending the money in more profitable areas by investing internationally in emerging markets. Banks were also investing in foreign currencies, which Stiglitz and others point out may lead to currency wars while China redirects its currency holdings away from the United States.
United States President Barack Obama and key advisers introduced a series of regulatory proposals in June 2009. The proposals address consumer protection, executive pay, bank financial cushions or capital requirements, expanded regulation of the shadow banking system and derivatives, and enhanced authority for the Federal Reserve to safely wind-down systemically important institutions, among others. In January 2010, Obama proposed additional regulations limiting the ability of banks to engage in proprietary trading. The proposals were dubbed "The Volcker Rule", in recognition of Paul Volcker, who has publicly argued for the proposed changes.
The U.S. Senate passed a reform bill in May 2010, following the House which passed a bill in December 2009. These bills must now be reconciled. The New York Times provided a comparative summary of the features of the two bills, which address to varying extent the principles enumerated by the Obama administration. For instance, the Volcker Rule against proprietary trading is not part of the legislation, though in the Senate bill regulators have the discretion but not the obligation to prohibit these trades.
It threatened the collapse of large financial institutions, which was prevented by the bailout of banks by national governments, but stock markets still dropped worldwide. In many areas, the housing market also suffered, resulting in evictions, foreclosures and prolonged unemployment. The crisis played a significant role in the failure of key businesses, declines in consumer wealth estimated in trillions of U.S. dollars, and a downturn in economic activity leading to the 2008–2012 global recession and contributing to the European sovereign-debt crisis. The active phase of the crisis, which manifested as a liquidity crisis, can be dated from August 9, 2007, when BNP Paribas terminated withdrawals from three hedge funds citing "a complete evaporation of liquidity".
The bursting of the U.S. (United States) housing bubble, which peaked in 2004, caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally. The financial crisis was triggered by a complex interplay of policies that encouraged home ownership, providing easier access to loans for subprime borrowers, overvaluation of bundled subprime mortgages based on the theory that housing prices would continue to escalate, questionable trading practices on behalf of both buyers and sellers, compensation structures that prioritize short-term deal flow over long-term value creation, and a lack of adequate capital holdings from banks and insurance companies to back the financial commitments they were making. Questions regarding bank solvency, declines in credit availability and damaged investor confidence had an impact on global stock markets, where securities suffered large losses during 2008 and early 2009. Economies worldwide slowed during this period, as credit tightened and international trade declined. Governments and central banks responded with unprecedented fiscal stimulus, monetary policy expansion and institutional bailouts. In the U.S., Congress passed the American Recovery and Reinvestment Act of 2009.
Many causes for the financial crisis have been suggested, with varying weight assigned by experts. The U.S. Senate's Levin–Coburn Report concluded that the crisis was the result of "high risk, complex financial products; undisclosed conflicts of interest; the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street." The Financial Crisis Inquiry Commission concluded that the financial crisis was avoidable and was caused by "widespread failures in financial regulation and supervision", "dramatic failures of corporate governance and risk management at many systemically important financial institutions", "a combination of excessive borrowing, risky investments, and lack of transparency" by financial institutions, ill preparation and inconsistent action by government that "added to the uncertainty and panic", a "systemic breakdown in accountability and ethics", "collapsing mortgage-lending standards and the mortgage securitization pipeline", deregulation of over-the-counter derivatives, especially credit default swaps, and "the failures of credit rating agencies" to correctly price risk. The 1999 repeal of the Glass-Steagall Act effectively removed the separation between investment banks and depository banks in the United States. Critics argued that credit rating agencies and investors failed to accurately price the risk involved with mortgage-related financial products, and that governments did not adjust their regulatory practices to address 21st-century financial markets. Research into the causes of the financial crisis has also focused on the role of interest rate spreads.
As part of the housing and credit booms, the number of financial agreements called mortgage-backed securities (MBS) and collateralized debt obligations (CDO), which derived their value from mortgage payments and housing prices, greatly increased. Such financial innovation enabled institutions and investors around the world to invest in the U.S. housing market. As housing prices declined, major global financial institutions that had borrowed and invested heavily in subprime MBS reported significant losses.
Falling prices also resulted in homes worth less than the mortgage loan, providing a financial incentive to enter foreclosure. The ongoing foreclosure epidemic that began in late 2006 in the U.S. continues to drain wealth from consumers and erodes the financial strength of banking institutions. Defaults and losses on other loan types also increased significantly as the crisis expanded from the housing market to other parts of the economy. Total losses are estimated in the trillions of U.S. dollars globally.
While the housing and credit bubbles were building, a series of factors caused the financial system to both expand and become increasingly fragile, a process called financialization. U.S. Government policy from the 1970s onward has emphasized deregulation to encourage business, which resulted in less oversight of activities and less disclosure of information about new activities undertaken by banks and other evolving financial institutions. Thus, policymakers did not immediately recognize the increasingly important role played by financial institutions such as investment banks and hedge funds, also known as the shadow banking system. Some experts believe these institutions had become as important as commercial (depository) banks in providing credit to the U.S. economy, but they were not subject to the same regulations.
These institutions, as well as certain regulated banks, had also assumed significant debt burdens while providing the loans described above and did not have a financial cushion sufficient to absorb large loan defaults or MBS losses. These losses impacted the ability of financial institutions to lend, slowing economic activity. Concerns regarding the stability of key financial institutions drove central banks to provide funds to encourage lending and restore faith in the commercial paper markets, which are integral to funding business operations. Governments also bailed out key financial institutions and implemented economic stimulus programs, assuming significant additional financial commitments.
The U.S. Financial Crisis Inquiry Commission reported its findings in January 2011. It concluded that "the crisis was avoidable and was caused by: widespread failures in financial regulation, including the Federal Reserve’s failure to stem the tide of toxic mortgages; dramatic breakdowns in corporate governance including too many financial firms acting recklessly and taking on too much risk; an explosive mix of excessive borrowing and risk by households and Wall Street that put the financial system on a collision course with crisis; key policy makers ill prepared for the crisis, lacking a full understanding of the financial system they oversaw; and systemic breaches in accountability and ethics at all levels".
During a period of tough competition between mortgage lenders for revenue and market share, and when the supply of creditworthy borrowers was limited, mortgage lenders relaxed underwriting standards and originated riskier mortgages to less creditworthy borrowers. In the view of some analysts, the relatively conservative government-sponsored enterprises (GSEs) policed mortgage originators and maintained relatively high underwriting standards prior to 2003. However, as market power shifted from securitizers to originators and as intense competition from private securitizers undermined GSE power, mortgage standards declined and risky loans proliferated. The worst loans were originated in 2004–2007, the years of the most intense competition between securitizers and the lowest market share for the GSEs.
The majority report of the Financial Crisis Inquiry Commission, written by the six Democratic appointees, the minority report, written by 3 of the 4 Republican appointees, studies by Federal Reserve economists, and the work of several independent scholars generally contend that government affordable housing policy was not the primary cause of the financial crisis. Although they concede that governmental policies had some role in causing the crisis, they contend that GSE loans performed better than loans securitized by private investment banks, and performed better than some loans originated by institutions that held loans in their own portfolios. Paul Krugman has even claimed that the GSE never purchased subprime loans – a claim that is widely disputed.
In his dissent to the majority report of the Financial Crisis Inquiry Commission, American Enterprise Institute fellow Peter J. Wallison stated his belief that the roots of the financial crisis can be traced directly and primarily to affordable housing policies initiated by HUD in the 1990s and to massive risky loan purchases by government-sponsored entities Fannie Mae and Freddie Mac. Later, based upon information in the SEC's December 2011 securities fraud case against 6 ex-executives of Fannie and Freddie, Peter Wallison and Edward Pinto estimated that, in 2008, Fannie and Freddie held 13 million substandard loans totaling over $2 trillion.
In the early and mid-2000s, the Bush administration called numerous times for investigation into the safety and soundness of the GSEs and their swelling portfolio of subprime mortgages. On September 10, 2003, the House Financial Services Committee held a hearing at the urging of the administration to assess safety and soundness issues and to review a recent report by the Office of Federal Housing Enterprise Oversight (OFHEO) that had uncovered accounting discrepancies within the two entities. The hearings never resulted in new legislation or formal investigation of Fannie Mae and Freddie Mac, as many of the committee members refused to accept the report and instead rebuked OFHEO for their attempt at regulation. Some believe this was an early warning to the systemic risk that the growing market in subprime mortgages posed to the U.S. financial system that went unheeded.
A 2000 United States Department of the Treasury study of lending trends for 305 cities from 1993 to 1998 showed that $467 billion of mortgage lending was made by Community Reinvestment Act (CRA)-covered lenders into low and mid level income (LMI) borrowers and neighborhoods, representing 10% of all U.S. mortgage lending during the period. The majority of these were prime loans. Sub-prime loans made by CRA-covered institutions constituted a 3% market share of LMI loans in 1998, but in the run-up to the crisis, fully 25% of all sub-prime lending occurred at CRA-covered institutions and another 25% of sub-prime loans had some connection with CRA. In addition, an analysis by the Federal Reserve Bank of Dallas in 2009, however, concluded that the CRA was not responsible for the mortgage loan crisis, pointing out that CRA rules have been in place since 1995 whereas the poor lending emerged only a decade later. Furthermore, most sub-prime loans were not made to the LMI borrowers targeted by the CRA, especially in the years 2005–2006 leading up to the crisis. Nor did it find any evidence that lending under the CRA rules increased delinquency rates or that the CRA indirectly influenced independent mortgage lenders to ramp up sub-prime lending.
To other analysts the delay between CRA rule changes (in 1995) and the explosion of subprime lending is not surprising, and does not exonerate the CRA. They contend that there were two, connected causes to the crisis: the relaxation of underwriting standards in 1995 and the ultra-low interest rates initiated by the Federal Reserve after the terrorist attack on September 11, 2001. Both causes had to be in place before the crisis could take place. Critics also point out that publicly announced CRA loan commitments were massive, totaling $4.5 trillion in the years between 1994 and 2007. They also argue that the Federal Reserve’s classification of CRA loans as “prime” is based on the faulty and self-serving assumption that high-interest-rate loans (3 percentage points over average) equal “subprime” loans.
Others have pointed out that there were not enough of these loans made to cause a crisis of this magnitude. In an article in Portfolio Magazine, Michael Lewis spoke with one trader who noted that "There weren’t enough Americans with [bad] credit taking out [bad loans] to satisfy investors' appetite for the end product." Essentially, investment banks and hedge funds used financial innovation to enable large wagers to be made, far beyond the actual value of the underlying mortgage loans, using derivatives called credit default swaps, collateralized debt obligations and synthetic CDOs.
Countering Krugman, Peter J. Wallison wrote: "It is not true that every bubble—even a large bubble—has the potential to cause a financial crisis when it deflates." Wallison notes that other developed countries had "large bubbles during the 1997–2007 period" but "the losses associated with mortgage delinquencies and defaults when these bubbles deflated were far lower than the losses suffered in the United States when the 1997–2007 [bubble] deflated." According to Wallison, the reason the U.S. residential housing bubble (as opposed to other types of bubbles) led to financial crisis was that it was supported by a huge number of substandard loans – generally with low or no downpayments.
Located approximately 250 kilometres (160 mi) east of Puerto Rico and the nearer Virgin Islands, St. Barthélemy lies immediately southeast of the islands of Saint Martin and Anguilla. It is one of the Renaissance Islands. St. Barthélemy is separated from Saint Martin by the Saint-Barthélemy Channel. It lies northeast of Saba and St Eustatius, and north of St Kitts. Some small satellite islets belong to St. Barthélemy including Île Chevreau (Île Bonhomme), Île Frégate, Île Toc Vers, Île Tortue and Gros Îlets (Îlots Syndare). A much bigger islet, Île Fourchue, lies on the north of the island, in the Saint-Barthélemy Channel. Other rocky islets which include Coco, the Roques (or little Turtle rocks), the Goat, and the Sugarloaf.
Residents of Saint-Barthélemy (Saint-Barthélemoise people) are French citizens and work at establishments on the island. Most of them are descendants of the first settlers, of Breton, Norman, Poitevin, Saintongeais and Angevin lineage. French is the native tongue of the population. English is understood in hotels and restaurants, and a small population of Anglophones have been resident in Gustavia for many years. The St. Barthélemy French patois is spoken by some 500–700 people in the leeward portion of the island and is superficially related to Quebec French, whereas Créole French is limited to the windward side. Unlike other populations in the Caribbean, language preference between the Créole and Patois is geographically, and not racially, determined.[page needed]
On 7 February 2007, the French Parliament passed a bill granting COM status to both St. Barthélemy and (separately) to the neighbouring Saint Martin. The new status took effect on 15 July 2007, when the first territorial council was elected, according to the law. The island has a president (elected every five years), a unicameral Territorial Council of nineteen members who are elected by popular vote and serve for five-year terms, and an executive council of seven members. Elections to these councils were first held on 1 July 2007 with the last election in March 2012.
One senator represents the island in the French Senate. The first election was held on 21 September 2008 with the last election in September 2014. St. Barthélemy became an overseas territory of the European Union on 1 January 2012, but the island's inhabitants remain French citizens with EU status holding EU passports. France is responsible for the defence of the island and as such has stationed a security force on the island comprising six policemen and thirteen gendarmes (posted on two-year term).
Agricultural production on the island is difficult given the dry and rocky terrain, but the early settlers managed to produce vegetables, cotton, pineapples, salt, bananas and also fishing. Sweet potato is also grown in patches. The islanders developed commerce through the port of Gustavia. Duty-free port attractions, retail trade, high-end tourism (mostly from North America) and its luxury hotels and villas have increased the island's prosperity, reflected in the high standard of living of its citizens.
International investment and the wealth generated by wealthy tourists explain the high standard of living on the island. St. Barthélemy is considered a playground of the rich and famous,[citation needed] especially as a winter haven, and is known for its beaches, gourmet dining and high-end designers. Most of the food is imported by airplane or boat from the US or France. Tourism attracts about 200,000 visitors every year. As a result, there is a boom in house building activity catering to the tourists and also to the permanent residents of the island, with prices as high as €61,200,000 for a beachfront villa.
St. Barthélemy has about 25 hotels, most of them with 15 rooms or fewer. The largest has 58 rooms. Hotels are classified in the traditional French manner; 3 Star, 4 Star and 4 Star Luxe. Of particular note are Eden Rock and Cheval Blanc. Hotel Le Toiny, the most expensive hotel on the island, has 12 rooms. Most places of accommodation are in the form of private villas, of which there are some 400 available to rent on the island. The island's tourism industry, though expensive, attracts 70,000 visitors every year to its luxury hotels and villas and another 130,000 people arrive by luxury boats. It also attracts a labour force from Brazil and Portugal to meet the industry needs.
As the terrain is generally arid, the hills have mostly poor soil and support only cacti and succulent plants. During the rainy season the area turns green with vegetation and grass. The eastern part of the island is greener as it receives more rainfall. A 1994 survey has revealed several hundred indigenous species of plants including the naturalized varieties of flora; some growing in irrigated areas while the dry areas are dominated by the cacti variety. Sea grapes and palm trees are a common sight with mangroves and shrubs surviving in the saline coastal swamps. Coconut palm was brought to the island from the Pacific islands. Important plants noted on the island are:
Other trees of note include the royal palm, sea grape trees in the form of shrubs on the beaches and as 5 to 7 m trees in the interior areas of the island, aloe or aloe vera (brought from the Mediterranean), the night blooming cereus, mamillaria nivosa, yellow prickly pear or barbary fig which was planted as barbed wire defences against invading British army in 1773, Mexican cactus, stapelia gigantea, golden trumpet or yellow bell which was originally from South America, bougainvillea and others.
Marine mammals are many, such as the dolphins, porpoises and whales, which are seen here during the migration period from December till May. Turtles are a common sight along the coastline of the island. They are a protected species and in the endangered list. It is stated that it will take 15–50 years for this species to attain reproductive age. Though they live in the sea, the females come to the shore to lay eggs and are protected by private societies. Three species of turtles are particularly notable. These are: The leatherback sea turtles which have leather skin instead of a shell and are the largest of the type found here, some times measuring a much as 3 m (average is about 1.5 m) and weighing about 450 kg (jellyfish is their favourite diet); the hawksbill turtles, which have hawk-like beaks and found near reefs, generally about 90 cm in diameter and weigh about 60 kg and their diet consists of crabs and snails; and the green turtles, herbivores which have rounded heads, generally about 90 cm in diameter and live amidst tall sea grasses.
The marine life found here consists of anemones, urchins, sea cucumbers, and eels, which all live on the reefs along with turtles, conch and many varieties of marine fishes. The marine aquafauna is rich in conch, which has pearly-pink shells. Its meat is a favourite food supplement item and their shells are a collectors item. Other species of fish which are recorded close to the shore line in shallow waters are: sergeant majors, the blue chromis, brown chromis, surgeon fish; blue tangs and trumpet fish. On the shore are ghost crabs, which always live on the beach in small burrowed tunnels made in sand, and the hermit crabs, which live in land but lay eggs in water and which also eat garbage and sewerage. They spend some months in the sea during and after the hatching season.
Saint-Barthélemy has a marine nature reserve, known as the Reserve Naturelle that covers 1.200 ha, and is divided into 5 zones all around the island to form a network of protected areas. The Reserve includes the bays of Grand Cul de Sac, Colombier, Marigot, Petit Cul de Sac, Petite Anse as well as waters around offshore rocks such as Les Gross Islets, Pain de Sucre, Tortue and Forchue. The Reserve is designed to protect the islands coral reefs, seagrass and endangered marine species including sea turtles. The Reserve has two levels of protection, the yellow zones of protection where certain non-extractive activities, like snorkeling and boating, are allowed and the red zones of high protection where most activities including SCUBA are restricted in order to protect or recover marine life. Anchoring is prohibited in the Reserve and mooring buoys are in place in some of the protected bays like Colombier
Among the notable structures in the town are the three forts built by the Swedes for defense purposes. One of these forts, known as Fort Oscar (formerly Gustav Adolph), which overlooks the sea is located on the far side of La Pointe. However, the ruins have been replaced by a modern military building which now houses the local gendarmerie. The other fort known as Fort Karl now presents a very few ruins. The third fort built by the Swedes is the Fort Gustav, which is also seen in ruins strewn around the weather station and the Light House. The fort built in 1787 over a hill slope has ruins of ramparts, guardhouse, munitions depot, wood-burning oven and so forth.
French cuisine, West Indian cuisine, Creole cuisine, Italian cuisine and Asian cuisine are common in St. Barthélemy. The island has over 70 restaurants serving many dishes and others are a significant number of gourmet restaurants; many of the finest restaurants are located in the hotels. There are also a number of snack restaurants which the French call "les snacks" or "les petits creux" which include sandwiches, pizzas and salads. West Indian cuisine, steamed vegetables with fresh fish is common; Creole dishes tend to be spicier. The island hosts gastronomic events throughout the year, with dishes such as spring roll of shrimp and bacon, fresh grilled lobster, Chinese noodle salad with coconut milk, and grilled beef fillet etc.
The Transat AG2R Race, held every alternate year, is an event which originates in Concarneau in Brittany, France, reaching St. Barthélemy. It is a boat race with boats of 10 m length with a single hull and with essential safety equipment. Each boat is navigated by two sailors. Kitesurfing and other water sports have also become popular on the island in recent years, especially at Grand Cul-de-Sac beach (Baie de Grand Cul de Sac) for windy sports as kitesurfing and Saint Jean Beach ( Baie de Saint Jean), Lorient, Toiny and Anse des Cayes for surfing. Tennis is also popular on the island and it has several tennis clubs, Tennis Clube de Flamboyant in Grand Cul-de-Sac, AJOE Tennis Club in Orient and ASCO in Colombier.
St. Barthélemy has a small airport known as Gustaf III Airport on the north coast of the island that is served by small regional commercial aircraft and charters. The nearest airport with a runway length sufficient to land a typical commercial jet airliner is on the neighboring island of Sint Maarten: Princess Juliana International Airport, which acts as a hub, providing connecting flights with regional carriers to St. Barthélemy. Several international airlines and domestic Caribbean airlines operate in this sector.
Saint-Barthélemy (French: Saint-Barthélemy, French pronunciation: [sɛ̃baʁtelemi]), officially the Territorial collectivity of Saint-Barthélemy (French: Collectivité territoriale de Saint-Barthélemy), is an overseas collectivity of France. Often abbreviated to Saint-Barth in French, or St. Barts or St. Barths in English, the indigenous people called the island Ouanalao. St. Barthélemy lies about 35 kilometres (22 mi) southeast of St. Martin and north of St. Kitts. Puerto Rico is 240 kilometres (150 mi) to the west in the Greater Antilles.
Saint Barthélemy, a volcanic island fully encircled by shallow reefs, has an area of 25 square kilometres (9.7 sq mi) and a population of 9,035 (Jan. 2011 estimate). Its capital is Gustavia[citation needed], which also contains the main harbour to the island. It is the only Caribbean island which was a Swedish colony for any significant length of time; Guadeloupe was under Swedish rule only briefly at the end of the Napoleonic Wars. Symbolism from the Swedish national arms, the Three Crowns, still appears in the island's coat of arms. The language, cuisine, and culture, however, are distinctly French. The island is a popular tourist destination during the winter holiday season, especially for the rich and famous during the Christmas and new year period.
Saint Barthélemy was for many years a French commune forming part of Guadeloupe, which is an overseas region and department of France. Through a referendum in 2003, island residents sought separation from the administrative jurisdiction of Guadeloupe, and it was finally accomplished in 2007. The island of Saint Barthélemy became an Overseas Collectivity (COM). A governing territorial council was elected for its administration, which has provided the island with a certain degree of autonomy. The Hotel de Ville, which was the town hall, is now the Hotel de la Collectivité. A senator represents the island in Paris. St. Barthélemy has retained its free port status.
Grande Saline Bay provides temporary anchorage for small vessels while Colombier Bay, to the northwest, has a 4 fathoms patch near mid entrance. In the bight of St. Jean Bay there is a narrow cut through the reef. The north and east sides of the island are fringed, to a short distance from the shore, by a visible coral reef. Reefs are mostly in shallow waters and are clearly visible. The coastal areas abound with beaches and many of these have offshore reefs, some of which are part of a marine reserve.
There are as many as 22 public beaches (most beaches on St Barthélémy are known as "Anse de..." etc. ) of which 15 are considered suitable for swimming. They are categorized and divided into two groups, the leeward side (calm waters protected by the island itself) and windward side (some of which are protected by hills and reefs). The windward beaches are popular for windsurfing. The beach of St Jean is suitable for water sports and facilities have been created for that purpose. The long beach at Lorient has shade and is a quiet beach as compared to St. Jean.
The island covers an area of 25 square kilometres (2,500 ha). The eastern side is wetter than the western. Although the climate is essentially arid, the rainfall does average 1000 mm annually, but with considerable variation over the terrain. Summer is from May to November, which is also the rainy season. Winter from December to April is the dry season. Sunshine is very prominent for nearly the entire year and even during the rainy season. Humidity, however, is not very high due to the winds. The average temperature is around 25 °C with day temperatures rising to 32 °C. The average high and low temperatures in January are 28 °C and 22 °C, respectively, while in July they are 30 °C and 24 °C. The lowest night temperature recorded is 13 °C. The Caribbean sea waters in the vicinity generally maintain a temperature of about 27 °C.
When the British invaded the harbour town in 1744[verification needed], the town’s architectural buildings were destroyed[verification needed]. Subsequently, new structures were built in the town around the harbour area[verification needed] and the Swedes had also further added to the architectural beauty of the town in 1785 with more buildings, when they had occupied the town. Earlier to their occupation, the port was known as "Carénage". The Swedes renamed it as Gustavia in honour of their king Gustav III. It was then their prime trading center. The port maintained a neutral stance since the Caribbean war was on in the 18th century. They used it as trading post of contraband and the city of Gustavia prospered but this prosperity was short lived.
Musée Territorial de St.-Barthélemy is a historical museum known as the "St. Barts Municipal Museum" also called the "Wall House" (musée – bibliothèque) in Gustavia, which is located on the far end of La Pointe. The museum is housed in an old stone house, a two-storey building which has been refurbished. The island’s history relating to French, Swedish and British period of occupation is well presented in the museum with photographs, maps and paintings. Also on display are the ancestral costumes, antique tools, models of Creole houses and ancient fishing boats. It also houses a library.
In modern molecular biology and genetics, the genome is the genetic material of an organism. It consists of DNA (or RNA in RNA viruses). The genome includes both the genes and the non-coding sequences of the DNA/RNA.
The term was created in 1920 by Hans Winkler, professor of botany at the University of Hamburg, Germany. The Oxford Dictionary suggests the name to be a blend of the words gene and chromosome. However, see omics for a more thorough discussion. A few related -ome words already existed—such as biome, rhizome, forming a vocabulary into which genome fits systematically.
Some organisms have multiple copies of chromosomes: diploid, triploid, tetraploid and so on. In classical genetics, in a sexually reproducing organism (typically eukarya) the gamete has half the number of chromosomes of the somatic cell and the genome is a full set of chromosomes in a diploid cell. The halving of the genetic material in gametes is accomplished by the segregation of homologous chromosomes during meiosis. In haploid organisms, including cells of bacteria, archaea, and in organelles including mitochondria and chloroplasts, or viruses, that similarly contain genes, the single or set of circular or linear chains of DNA (or RNA for some viruses), likewise constitute the genome. The term genome can be applied specifically to mean what is stored on a complete set of nuclear DNA (i.e., the "nuclear genome") but can also be applied to what is stored within organelles that contain their own DNA, as with the "mitochondrial genome" or the "chloroplast genome". Additionally, the genome can comprise non-chromosomal genetic elements such as viruses, plasmids, and transposable elements.
When people say that the genome of a sexually reproducing species has been "sequenced", typically they are referring to a determination of the sequences of one set of autosomes and one of each type of sex chromosome, which together represent both of the possible sexes. Even in species that exist in only one sex, what is described as a "genome sequence" may be a composite read from the chromosomes of various individuals. Colloquially, the phrase "genetic makeup" is sometimes used to signify the genome of a particular individual or organism.[citation needed] The study of the global properties of genomes of related organisms is usually referred to as genomics, which distinguishes it from genetics which generally studies the properties of single genes or groups of genes.
Both the number of base pairs and the number of genes vary widely from one species to another, and there is only a rough correlation between the two (an observation known as the C-value paradox). At present, the highest known number of genes is around 60,000, for the protozoan causing trichomoniasis (see List of sequenced eukaryotic genomes), almost three times as many as in the human genome.
In 1976, Walter Fiers at the University of Ghent (Belgium) was the first to establish the complete nucleotide sequence of a viral RNA-genome (Bacteriophage MS2). The next year Fred Sanger completed the first DNA-genome sequence: Phage Φ-X174, of 5386 base pairs. The first complete genome sequences among all three domains of life were released within a short period during the mid-1990s: The first bacterial genome to be sequenced was that of Haemophilus influenzae, completed by a team at The Institute for Genomic Research in 1995. A few months later, the first eukaryotic genome was completed, with sequences of the 16 chromosomes of budding yeast Saccharomyces cerevisiae published as the result of a European-led effort begun in the mid-1980s. The first genome sequence for an archaeon, Methanococcus jannaschii, was completed in 1996, again by The Institute for Genomic Research.
The development of new technologies has made it dramatically easier and cheaper to do sequencing, and the number of complete genome sequences is growing rapidly. The US National Institutes of Health maintains one of several comprehensive databases of genomic information. Among the thousands of completed genome sequencing projects include those for rice, a mouse, the plant Arabidopsis thaliana, the puffer fish, and the bacteria E. coli. In December 2013, scientists first sequenced the entire genome of a Neanderthal, an extinct species of humans. The genome was extracted from the toe bone of a 130,000-year-old Neanderthal found in a Siberian cave.
New sequencing technologies, such as massive parallel sequencing have also opened up the prospect of personal genome sequencing as a diagnostic tool, as pioneered by Manteia Predictive Medicine. A major step toward that goal was the completion in 2007 of the full genome of James D. Watson, one of the co-discoverers of the structure of DNA.
Whereas a genome sequence lists the order of every DNA base in a genome, a genome map identifies the landmarks. A genome map is less detailed than a genome sequence and aids in navigating around the genome. The Human Genome Project was organized to map and to sequence the human genome. A fundamental step in the project was the release of a detailed genomic map by Jean Weissenbach and his team at the Genoscope in Paris.
Genome composition is used to describe the make up of contents of a haploid genome, which should include genome size, proportions of non-repetitive DNA and repetitive DNA in details. By comparing the genome compositions between genomes, scientists can better understand the evolutionary history of a given genome.
When talking about genome composition, one should distinguish between prokaryotes and eukaryotes as the big differences on contents structure they have. In prokaryotes, most of the genome (85–90%) is non-repetitive DNA, which means coding DNA mainly forms it, while non-coding regions only take a small part. On the contrary, eukaryotes have the feature of exon-intron organization of protein coding genes; the variation of repetitive DNA content in eukaryotes is also extremely high. In mammals and plants, the major part of the genome is composed of repetitive DNA.
Most biological entities that are more complex than a virus sometimes or always carry additional genetic material besides that which resides in their chromosomes. In some contexts, such as sequencing the genome of a pathogenic microbe, "genome" is meant to include information stored on this auxiliary material, which is carried in plasmids. In such circumstances then, "genome" describes all of the genes and information on non-coding DNA that have the potential to be present.
In eukaryotes such as plants, protozoa and animals, however, "genome" carries the typical connotation of only information on chromosomal DNA. So although these organisms contain chloroplasts or mitochondria that have their own DNA, the genetic information contained by DNA within these organelles is not considered part of the genome. In fact, mitochondria are sometimes said to have their own genome often referred to as the "mitochondrial genome". The DNA found within the chloroplast may be referred to as the "plastome".
Genome size is the total number of DNA base pairs in one copy of a haploid genome. The genome size is positively correlated with the morphological complexity among prokaryotes and lower eukaryotes; however, after mollusks and all the other higher eukaryotes above, this correlation is no longer effective. This phenomenon also indicates the mighty influence coming from repetitive DNA act on the genomes.
Since genomes are very complex, one research strategy is to reduce the number of genes in a genome to the bare minimum and still have the organism in question survive. There is experimental work being done on minimal genomes for single cell organisms as well as minimal genomes for multi-cellular organisms (see Developmental biology). The work is both in vivo and in silico.
The proportion of non-repetitive DNA is calculated by using the length of non-repetitive DNA divided by genome size. Protein-coding genes and RNA-coding genes are generally non-repetitive DNA. A bigger genome does not mean more genes, and the proportion of non-repetitive DNA decreases along with increasing genome size in higher eukaryotes.
It had been found that the proportion of non-repetitive DNA can vary a lot between species. Some E. coli as prokaryotes only have non-repetitive DNA, lower eukaryotes such as C. elegans and fruit fly, still possess more non-repetitive DNA than repetitive DNA. Higher eukaryotes tend to have more repetitive DNA than non-repetitive ones. In some plants and amphibians, the proportion of non-repetitive DNA is no more than 20%, becoming a minority component.
The proportion of repetitive DNA is calculated by using length of repetitive DNA divide by genome size. There are two categories of repetitive DNA in genome: tandem repeats and interspersed repeats.
Tandem repeats are usually caused by slippage during replication, unequal crossing-over and gene conversion, satellite DNA and microsatellites are forms of tandem repeats in the genome. Although tandem repeats count for a significant proportion in genome, the largest proportion in mammalian is the other type, interspersed repeats.
Interspersed repeats mainly come from transposable elements (TEs), but they also include some protein coding gene families and pseudogenes. Transposable elements are able to integrate into the genome at another site within the cell. It is believed that TEs are an important driving force on genome evolution of higher eukaryotes. TEs can be classified into two categories, Class 1 (retrotransposons) and Class 2 (DNA transposons).
Retrotransposons can be transcribed into RNA, which are then duplicated at another site into the genome. Retrotransposons can be divided into Long terminal repeats (LTRs) and Non-Long Terminal Repeats (Non-LTR).
DNA transposons generally move by "cut and paste" in the genome, but duplication has also been observed. Class 2 TEs do not use RNA as intermediate and are popular in bacteria, in metazoan it has also been found.
Genomes are more than the sum of an organism's genes and have traits that may be measured and studied without reference to the details of any particular genes and their products. Researchers compare traits such as chromosome number (karyotype), genome size, gene order, codon usage bias, and GC-content to determine what mechanisms could have produced the great variety of genomes that exist today (for recent overviews, see Brown 2002; Saccone and Pesole 2003; Benfey and Protopapas 2004; Gibson and Muse 2004; Reese 2004; Gregory 2005).
Duplications play a major role in shaping the genome. Duplication may range from extension of short tandem repeats, to duplication of a cluster of genes, and all the way to duplication of entire chromosomes or even entire genomes. Such duplications are probably fundamental to the creation of genetic novelty.
Horizontal gene transfer is invoked to explain how there is often extreme similarity between small portions of the genomes of two organisms that are otherwise very distantly related. Horizontal gene transfer seems to be common among many microbes. Also, eukaryotic cells seem to have experienced a transfer of some genetic material from their chloroplast and mitochondrial genomes to their nuclear chromosomes.
A comprehensive school is a state school that does not select its intake on the basis of academic achievement or aptitude. This is in contrast to the selective school system, where admission is restricted on the basis of selection criteria. The term is commonly used in relation to England and Wales, where comprehensive schools were introduced on an experimental basis in the 1940s and became more widespread from 1965. About 90% of British secondary school pupils now attend comprehensive schools. They correspond broadly to the public high school in the United States and Canada and to the German Gesamtschule.[citation needed]

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