United States Congress
The United States Congress is the bicameral legislature of the Federal Government of the United States. The legislature consists of two chambers: the House of the Senate; the Congress meets in the United States Capitol in Washington, D. C.. Both senators and representatives are chosen through direct election, though vacancies in the Senate may be filled by a gubernatorial appointment. Congress has 535 voting members: 100 senators; the House of Representatives has six non-voting members representing Puerto Rico, American Samoa, the Northern Mariana Islands, the U. S. Virgin Islands, the District of Columbia in addition to its 435 voting members. Although they cannot vote in the full house, these members can address the house and vote in congressional committees, introduce legislation; the members of the House of Representatives serve two-year terms representing the people of a single constituency, known as a "district". Congressional districts are apportioned to states by population using the United States Census results, provided that each state has at least one congressional representative.
Each state, regardless of population or size, has two senators. There are 100 senators representing the 50 states; each senator is elected at-large in their state for a six-year term, with terms staggered, so every two years one-third of the Senate is up for election. To be eligible for election, a candidate must be aged at least 25 or 30, have been a citizen of the United States for seven or nine years, be an inhabitant of the state which they represent; the Congress was created by the Constitution of the United States and first met in 1789, replacing in its legislative function the Congress of the Confederation. Although not mandated, in practice since the 19th century, Congress members are affiliated with the Republican Party or with the Democratic Party and only with a third party or independents. Article One of the United States Constitution states, "All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives."
The House and Senate are equal partners in the legislative process—legislation cannot be enacted without the consent of both chambers. However, the Constitution grants each chamber some unique powers; the Senate ratifies treaties and approves presidential appointments while the House initiates revenue-raising bills. The House initiates impeachment cases. A two-thirds vote of the Senate is required before an impeached person can be forcibly removed from office; the term Congress can refer to a particular meeting of the legislature. A Congress covers two years; the Congress ends on the third day of January of every odd-numbered year. Members of the Senate are referred to as senators. Scholar and representative Lee H. Hamilton asserted that the "historic mission of Congress has been to maintain freedom" and insisted it was a "driving force in American government" and a "remarkably resilient institution". Congress is the "heart and soul of our democracy", according to this view though legislators achieve the prestige or name recognition of presidents or Supreme Court justices.
One analyst argues that it is not a reactive institution but has played an active role in shaping government policy and is extraordinarily sensitive to public pressure. Several academics described Congress: Congress reflects us in all our strengths and all our weaknesses, it reflects our regional idiosyncrasies, our ethnic and racial diversity, our multitude of professions, our shadings of opinion on everything from the value of war to the war over values. Congress is the government's most representative body... Congress is charged with reconciling our many points of view on the great public policy issues of the day. Congress is changing and is in flux. In recent times, the American south and west have gained House seats according to demographic changes recorded by the census and includes more minorities and women although both groups are still underrepresented. While power balances among the different parts of government continue to change, the internal structure of Congress is important to understand along with its interactions with so-called intermediary institutions such as political parties, civic associations, interest groups, the mass media.
The Congress of the United States serves two distinct purposes that overlap: local representation to the federal government of a congressional district by representatives and a state's at-large representation to the federal government by senators. Most incumbents seek re-election, their historical likelihood of winning subsequent elections exceeds 90 percent; the historical records of the House of Representatives and the Senate are maintained by the Center for Legislative Archives, a part of the National Archives and Records Administration. Congress is directly responsible for the governing of the District of Columbia, the current seat of the federal government; the First Continental Congress was a gathering of representatives from twelve of the thirteen British Colonies in North America. On July 4, 1776, the Second Continental Congress adopted the Declaration of Independence, referring to the new nation as the "United States of America"; the Articles of Confederation in 1781 created the Congress of the Confederation, a
Canada Mortgage and Housing Corporation
Canada Mortgage and Housing Corporation is a Crown Corporation of the Government of Canada. Its superseding agency was established after World War II, to help returning war veterans find housing, it has since expanded its mandate to assist housing for all Canadians. The organization's primary goals are to provide mortgage liquidity, assist in affordable housing development, provide "unbiased" research and advice to the Canadian government, housing industry. CMHC is the largest Crown corporation in terms of assets with some CA$252,107,000,000 as of 2015. CMHC is governed by a board of directors and is accountable to Parliament through the Minister of Families and Social Development; the portfolio was held by the Minister of Employment and Social Development. The board of directors and president are appointed by the Government of Canada; as Canada's national housing agency, CMHC contributes to the stability of the housing market and financial system, provides support to Canadians in housing need, offers objective housing research and advice to Canadian governments and the housing industry.
Near the end of World War II, the Canadian government began to worry about the demobilization of thousands of soldiers in Europe, their re-entrance to Canadian society. With so many people coming back to Canada, a number of problems could arise, one being that there may not be enough housing existing to accommodate the soldiers and their families; as such, on 1 January 1946 Central Mortgage and Housing Corporation was created to house returning war veterans and to lead Canada's housing programs. CMHC's basic functions were to administer the National Housing Act and the Home Improvement Loans Guarantee Act and provide discounting facilities for loan and mortgage companies; the capital of the Corporation was set at $25 million, a reserve fund of $5 million authorized to be accumulated from profits. This requirement and capital structure are still in effect today. Toward the end of the 1940s, the Government of Canada embarked on a program of much-needed social and rental housing, creating a federal-provincial public housing program for low-income families, with costs and subsidies shared 75% by the federal government and 25% by the province.
In 1947, CMHC took over the assets of Wartime Housing Ltd. another federal Crown corporation that had built thousands of rental housing units for war workers and veterans during the 6 years it was in operation. During the war, Ontario, was constructed and operated by Wartime Housing Limited in order to provide much-needed housing for munitions workers and returning veterans. In 1948, CMHC was given responsibility for Ajax, its biggest challenges in establishing Ajax as a functioning municipality were reimbursing Pickering Township and Ontario County for municipal services provided to Ajax and establishing an official plan for the growing community acceptable to relevant government agencies. After considerable controversy regarding land and water control, CMHC submitted a successful application to the Ontario Municipal Board in May 1950 making Ajax an improvement district; this was the first step toward municipal status. In the 1950s, the federal government, through CMHC, provided grants to cities to encourage them to tear down derelict buildings and build municipally owned housing corporations.
Regent Park in Toronto is the first urban renewal project, where 42 acres were cleared to build the 1056-unit, low-rent housing development in 1950. Habitations Jeanne-Mance in Montreal is another example. For further examples, see List of public housing projects in Canada. In 1951, CMHC started implementing the first of many federal-provincial public housing projects with 140 subsidized rent-to-income units in St. John's, Newfoundland. In 1954, the federal government expanded the National Housing Act to allow chartered banks to enter the NHA lending field. CMHC introduced mortgage loan insurance, taking on mortgage risks with a 25% down payment, making home ownership more accessible to Canadians; the banks thereafter began to issue mortgage loans with CMHC underwriting. If the individual receiving the loan went bankrupt the bank who gave the loan would not lose money, but instead would be reimbursed by the government; as part of CMHC lending and insurance mechanisms, low-risk borrowers would have to pay insurance premiums if they wanted to borrow with small down payments.
During the 1960s, CMHC built the first co-operative housing and, for the first time in Canadian history, multi-unit apartment buildings were beginning to outpace housing starts for single-family homes. Through ongoing research with the building industry, CMHC raised Canadian housing standards to be among the best in the world; the construction of Habitat for Expo 67 in Montréal led to many advances in materials and construction. In 1967, CMHC published Canadian Wood Frame House Construction which became an on-site resource for small builders and trades. Preservation of historic neighbourhoods and downtown living became a priority and, in 1973, CMHC oversaw the transformation of Vancouver's Granville Island, a run-down industrial area, into a thriving centre for culture and tourism. In 1974, CMHC introduced the Residential Rehabilitation Assistance Program to repair substandard homes to a minimum level of health and safety and to improve the accessibility of housing for disabled persons. During that decade, CMHC turned its attention to Aboriginal and rural housing, introducing the Winter Warmth Assistance Program in 1971, the first of its kind to provide funds to Aboriginals for urgent repairs to housing in rural areas.
In the 1980s, the federal government withdrew from the financing of public housing p
Subprime mortgage crisis
The United States subprime mortgage crisis was a nationwide financial crisis, occurring between 2007 and 2010, that contributed to the U. S. recession of December 2007 – June 2009. It was triggered by a large decline in home prices after the collapse of a housing bubble, leading to mortgage delinquencies and foreclosures and the devaluation of housing-related securities. Declines in residential investment preceded the recession and were followed by reductions in household spending and business investment. Spending reductions were more significant in areas with a combination of high household debt and larger housing price declines; the housing bubble preceding the crisis was financed with mortgage-backed securities and collateralized debt obligations, which offered higher interest rates than government securities, along with attractive risk ratings from rating agencies. While elements of the crisis first became more visible during 2007, several major financial institutions collapsed in September 2008, with significant disruption in the flow of credit to businesses and consumers and the onset of a severe global recession.
There were many causes of the crisis, with commentators assigning different levels of blame to financial institutions, credit agencies, government housing policies, consumers, among others. Two proximate causes were the increase in housing speculation; the percentage of lower-quality subprime mortgages originated during a given year rose from the historical 8% or lower range to 20% from 2004 to 2006, with much higher ratios in some parts of the U. S. A high percentage of these subprime mortgages, over 90% in 2006 for example, were adjustable-rate mortgages. Housing speculation increased, with the share of mortgage originations to investors rising from around 20% in 2000 to around 35% in 2006–2007. Investors those with prime credit ratings, were much more to default than non-investors when prices fell; these changes were part of a broader trend of lowered lending standards and higher-risk mortgage products, which contributed to U. S. households becoming indebted. The ratio of household debt to disposable personal income rose from 77% in 1990 to 127% by the end of 2007.
When U. S. home prices declined steeply after peaking in mid-2006, it became more difficult for borrowers to refinance their loans. As adjustable-rate mortgages began to reset at higher interest rates, mortgage delinquencies soared. Securities backed with mortgages, including subprime mortgages held by financial firms globally, lost most of their value. Global investors drastically reduced purchases of mortgage-backed debt and other securities as part of a decline in the capacity and willingness of the private financial system to support lending. Concerns about the soundness of U. S. credit and financial markets led to tightening credit around the world and slowing economic growth in the U. S. and Europe. The crisis had severe, long-lasting consequences for the U. S. and European economies. The U. S. entered a deep recession, with nearly 9 million jobs lost during 2008 and 2009 6% of the workforce. The number of jobs did not return to the December 2007 pre-crisis peak until May 2014. U. S. household net worth declined by nearly $13 trillion from its Q2 2007 pre-crisis peak, recovering by Q4 2012.
U. S. housing prices fell nearly 30% on average and the U. S. stock market fell 50% by early 2009, with stocks regaining their December 2007 level during September 2012. One estimate of lost output and income from the crisis comes to "at least 40% of 2007 gross domestic product". Europe continued to struggle with its own economic crisis, with elevated unemployment and severe banking impairments estimated at €940 billion between 2008 and 2012; as of January 2018, U. S. bailout funds had been recovered by the government, when interest on loans is taken into consideration. A total of $626B was invested, loaned, or granted due to various bailout measures, while $390B had been returned to the Treasury; the Treasury had earned another $323B in interest on bailout loans. The immediate cause of the crisis was the bursting of the United States housing bubble which peaked in 2005–2006. An increase in loan incentives such as easy initial terms and a long-term trend of rising housing prices had encouraged borrowers to assume risky mortgages in the anticipation that they would be able to refinance at easier terms.
However, once interest rates began to rise and housing prices started to drop moderately in 2006–2007 in many parts of the U. S. borrowers were unable to refinance. Defaults and foreclosure activity increased as easy initial terms expired, home prices fell, adjustable-rate mortgage interest rates reset higher; as housing prices fell, global investor demand for mortgage-related securities evaporated. This became apparent by July 2007, when investment bank Bear Stearns announced that two of its hedge funds had imploded; these funds had invested in securities. When the value of these securities dropped, investors demanded that these hedge funds provide additional collateral; this created a cascade of selling in these securities. Economist Mark Zandi wrote that this 2007 event was "arguably the proximate catalyst" for the financial market disruption that followed. Several other factors set the stage for the rise and fall of housing prices, related securities held by financial firms. In the years leading up to the crisis, the U.
S. received large amounts of foreign money from fast-growi
East Germany the German Democratic Republic, was a country that existed from 1949 to 1990, when the eastern portion of Germany was part of the Eastern Bloc during the Cold War. It described itself as a socialist "workers' and peasants' state", the territory was administered and occupied by Soviet forces at the end of World War II — the Soviet Occupation Zone of the Potsdam Agreement, bounded on the east by the Oder–Neisse line; the Soviet zone did not include it. The German Democratic Republic was established in the Soviet zone, while the Federal Republic was established in the three western zones. East Germany was a satellite state of the Soviet Union. Soviet occupation authorities began transferring administrative responsibility to German communist leaders in 1948, the GDR began to function as a state on 7 October 1949. However, Soviet forces remained in the country throughout the Cold War; until 1989, the GDR was governed by the Socialist Unity Party, though other parties nominally participated in its alliance organisation, the National Front of Democratic Germany.
The SED made the teaching of Marxism -- the Russian language compulsory in schools. The economy was centrally planned and state-owned. Prices of housing, basic goods and services were set by central government planners rather than rising and falling through supply and demand. Although the GDR had to pay substantial war reparations to the USSR, it became the most successful economy in the Eastern Bloc. Emigration to the West was a significant problem – as many of the emigrants were well-educated young people, it further weakened the state economically; the government fortified its western borders and, in 1961, built the Berlin Wall. Many people attempting to flee were killed by border guards or booby traps, such as landmines. Several others were imprisoned for many years. In 1989, numerous social and political forces in the GDR and abroad led to the fall of the Berlin Wall and the establishment of a government committed to liberalisation; the following year, open elections were held, international negotiations led to the signing of the Final Settlement treaty on the status and borders of Germany.
The GDR dissolved itself, Germany was reunified on 3 October 1990, becoming a sovereign state again. Several of the GDR's leaders, notably its last communist leader Egon Krenz, were prosecuted in reunified Germany for crimes committed during the Cold War. Geographically, the German Democratic Republic bordered the Baltic Sea to the north. Internally, the GDR bordered the Soviet sector of Allied-occupied Berlin, known as East Berlin, administered as the state's de facto capital, it bordered the three sectors occupied by the United States, United Kingdom and France known collectively as West Berlin. The three sectors occupied by the Western nations were sealed off from the rest of the GDR by the Berlin Wall from its construction in 1961 until it was brought down in 1989; the official name was Deutsche Demokratische Republik abbreviated to DDR. Both terms were used in East Germany, with increasing usage of the abbreviated form since East Germany considered West Germans and West Berliners to be foreigners following the promulgation of its second constitution in 1968.
West Germans, the western media and statesmen avoided the official name and its abbreviation, instead using terms like Ostzone, Sowjetische Besatzungszone, sogenannte DDR. The centre of political power in East Berlin was referred to as Pankow. Over time, the abbreviation DDR was increasingly used colloquially by West Germans and West German media; the term Westdeutschland, when used by West Germans, was always a reference to the geographic region of Western Germany and not to the area within the boundaries of the Federal Republic of Germany. However, this use was not always consistent. Before World War II, Ostdeutschland was used to describe all the territories east of the Elbe, as reflected in the works of sociologist Max Weber and political theorist Carl Schmitt. Explaining the internal impact of the DDR regime from the perspective of German history in the long term, historian Gerhard A. Ritter has argued that the East German state was defined by two dominant forces – Soviet Communism on the one hand, German traditions filtered through the interwar experiences of German Communists on the other.
It always was constrained by the powerful example of the prosperous West, to which East Germans compared their nation. The changes wrought by the Communists were most apparent in ending capitalism and transforming industry and agriculture, in the militarization of society, in the political thrust of the educational system and the media. On the other hand, there was little change made in the independent domains of the sciences, the engineering professions, the Protestant churches, in many bourgeois lifestyles. Social policy, says Ritter, became a critical legitimization tool in the last decades and mixed socialist and traditional elements about equally. At the Yalta Conference during World War II, the Allies (the U. S. the UK and
Education is the process of facilitating learning, or the acquisition of knowledge, values and habits. Educational methods include storytelling, teaching and directed research. Education takes place under the guidance of educators and learners may educate themselves. Education can take place in formal or informal settings and any experience that has a formative effect on the way one thinks, feels, or acts may be considered educational; the methodology of teaching is called pedagogy. Formal education is divided formally into such stages as preschool or kindergarten, primary school, secondary school and college, university, or apprenticeship. A right to education has been recognized by the United Nations. In most regions, education is compulsory up to a certain age. Etymologically, the word "education" is derived from the Latin word ēducātiō from ēducō, related to the homonym ēdūcō from ē- and dūcō. Education began in prehistory, as adults trained the young in the knowledge and skills deemed necessary in their society.
In pre-literate societies, this was achieved orally and through imitation. Story-telling passed knowledge and skills from one generation to the next; as cultures began to extend their knowledge beyond skills that could be learned through imitation, formal education developed. Schools existed in Egypt at the time of the Middle Kingdom. Plato founded the Academy in the first institution of higher learning in Europe; the city of Alexandria in Egypt, established in 330 BCE, became the successor to Athens as the intellectual cradle of Ancient Greece. There, the great Library of Alexandria was built in the 3rd century BCE. European civilizations suffered a collapse of literacy and organization following the fall of Rome in CE 476. In China, Confucius, of the State of Lu, was the country's most influential ancient philosopher, whose educational outlook continues to influence the societies of China and neighbours like Korea and Vietnam. Confucius gathered disciples and searched in vain for a ruler who would adopt his ideals for good governance, but his Analects were written down by followers and have continued to influence education in East Asia into the modern era.
The Aztecs had a well-developed theory about education, which has an equivalent word in Nahuatl called tlacahuapahualiztli. It means "the art of raising or educating a person" or "the art of strengthening or bringing up men." This was a broad conceptualization of education, which prescribed that it begins at home, supported by formal schooling, reinforced by community living. Historians cite that formal education was mandatory for everyone regardless of social class and gender. There was the word neixtlamachiliztli, "the act of giving wisdom to the face." These concepts underscore a complex set of educational practices, oriented towards communicating to the next generation the experience and intellectual heritage of the past for the purpose of individual development and his integration into the community. After the Fall of Rome, the Catholic Church became the sole preserver of literate scholarship in Western Europe; the church established cathedral schools in the Early Middle Ages as centres of advanced education.
Some of these establishments evolved into medieval universities and forebears of many of Europe's modern universities. During the High Middle Ages, Chartres Cathedral operated the famous and influential Chartres Cathedral School; the medieval universities of Western Christendom were well-integrated across all of Western Europe, encouraged freedom of inquiry, produced a great variety of fine scholars and natural philosophers, including Thomas Aquinas of the University of Naples, Robert Grosseteste of the University of Oxford, an early expositor of a systematic method of scientific experimentation, Saint Albert the Great, a pioneer of biological field research. Founded in 1088, the University of Bologne is considered the first, the oldest continually operating university. Elsewhere during the Middle Ages, Islamic science and mathematics flourished under the Islamic caliphate, established across the Middle East, extending from the Iberian Peninsula in the west to the Indus in the east and to the Almoravid Dynasty and Mali Empire in the south.
The Renaissance in Europe ushered in a new age of scientific and intellectual inquiry and appreciation of ancient Greek and Roman civilizations. Around 1450, Johannes Gutenberg developed a printing press, which allowed works of literature to spread more quickly; the European Age of Empires saw European ideas of education in philosophy, religion and sciences spread out across the globe. Missionaries and scholars brought back new ideas from other civilizations – as with the Jesuit China missions who played a significant role in the transmission of knowledge and culture between China and Europe, translating works from Europe like Euclid's Elements for Chinese scholars and the thoughts of Confucius for European audiences; the Enlightenment saw the emergence of a more secular educational outlook in Europe. In most countries today, full-time education, whether at school or otherwise, is compulsory for all children up to a certain age. Due to this the proliferation of compulsory education, combined with population growth, UNESCO has calculated that in the next 30 years more people will receive formal education than in all of human history thus far.
Formal education occurs in a structured environment. Formal education takes place in a school environme
The Federal National Mortgage Association known as Fannie Mae, is a United States government-sponsored enterprise and, since 1968, a publicly traded company. Founded in 1938 during the Great Depression as part of the New Deal, the corporation's purpose is to expand the secondary mortgage market by securitizing mortgage loans in the form of mortgage-backed securities, allowing lenders to reinvest their assets into more lending and in effect increasing the number of lenders in the mortgage market by reducing the reliance on locally based savings and loan associations, its brother organization is the Federal Home Loan Mortgage Corporation, better known as Freddie Mac. As of 2018, Fannie Mae is ranked #21 on the Fortune 500 rankings of the largest United States corporations by total revenue. Most housing loans in the early 1900s in the USA were short term mortgage loans with balloon payments; the Great Depression wrought havoc on the U. S. housing market as people were unable to make payments. By 1933, an estimated 20 to 25% of the nation's outstanding mortgage debt was in default.
This resulted in foreclosures. To address this, Fannie Mae was established by the U. S. Congress in 1938 by amendments to the National Housing Act as part of Franklin Delano Roosevelt's New Deal. Chartered as the National Mortgage Association of Washington, the organization's explicit purpose was to provide local banks with federal money to finance home loans in an attempt to raise levels of home ownership and the availability of affordable housing. Fannie Mae created a liquid secondary mortgage market and thereby made it possible for banks and other loan originators to issue more housing loans by buying Federal Housing Administration insured mortgages. For the first thirty years following its inception, Fannie Mae held a monopoly over the secondary mortgage market. Other considerations may have motivated the New Deal focus on the housing market: about a third of the nation's unemployed were in the building trade, the government had a vested interest in getting them back to work by giving them homes to build.
Fannie Mae was acquired by the Housing and Home Finance Agency from the Federal Loan Agency as a constituent unit in 1950. In 1954, an amendment known as the Federal National Mortgage Association Charter Act made Fannie Mae into "mixed-ownership corporation", meaning that federal government held the preferred stock while private investors held the common stock. In the 1968 change, arising from the Housing and Urban Development Act of 1968, Fannie Mae's predecessor was split into the current Fannie Mae and the Government National Mortgage Association. Ginnie Mae, which remained a government organization, buys FHA-insured mortgage loans as well as Veterans Administration and Farmers Home Administration insured mortgages; as such, Ginnie Mae is the only home-loan agency explicitly backed by the full faith and credit of the United States government. In 1970, the federal government authorized Fannie Mae to purchase conventional loans, i.e. those not insured by the FHA, VA, or FmHA, created the Federal Home Loan Mortgage Corporation, colloquially known as Freddie Mac, to compete with Fannie Mae and thus facilitate a more robust and efficient secondary mortgage market.
That same year FNMA went public on Pacific Exchanges. In 1981, Fannie Mae called it a mortgage-backed security. Ginnie Mae had guaranteed the first mortgage passthrough security of an approved lender in 1968 and in 1971 Freddie Mac issued its first mortgage passthrough, called a participation certificate, composed of private mortgage loans. In 1992, President George H. W. Bush signed the Housing and Community Development Act of 1992; the Act amended the charter of Fannie Mae and Freddie Mac to reflect the Democratic Congress' view that the GSEs "have an affirmative obligation to facilitate the financing of affordable housing for low- and moderate-income families in a manner consistent with their overall public purposes, while maintaining a strong financial condition and a reasonable economic return". For the first time, the GSEs were required to meet "affordable housing goals" set annually by the Department of Housing and Urban Development and approved by Congress; the initial annual goal for low-income and moderate-income mortgage purchases for each GSE was 30% of the total number of dwelling units financed by mortgage purchases and increased to 55% by 2007.
In 1999, Fannie Mae came under pressure from the Clinton administration to expand mortgage loans to low and moderate income borrowers by increasing the ratios of their loan portfolios in distressed inner city areas designated in the Community Reinvestment Act of 1977. In 1999, The New York Times reported that with the corporation's move towards the subprime market "Fannie Mae is taking on more risk, which may not pose any difficulties during flush economic times, but the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980s." In 2000, because of a re-assessment of the housing market by HUD, anti-predatory lending rules were put into place that disallowed risky, high-cost loans from being credited toward affordable housing goals. In 2004, these rules were dropped and high-risk loans were again counted toward affordable housing goals; the intent was that Fannie Mae's enforcement of the underwriting standards they maintained for standard conf
A capital market is a financial market in which long-term debt or equity-backed securities are bought and sold. Capital markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments. Financial regulators like the Bank of England and the U. S. Securities and Exchange Commission oversee capital markets to protect investors against fraud, among other duties. Modern capital markets are invariably hosted on computer-based electronic trading platforms; as an example, in the United States, any American citizen with an internet connection can create an account with TreasuryDirect and use it to buy bonds in the primary market, though sales to individuals form only a tiny fraction of the total volume of bonds sold. Various private companies provide browser-based platforms that allow individuals to buy shares and sometimes bonds in the secondary markets. There are many thousands of such systems, most serving only small parts of the overall capital markets.
Entities hosting the systems include stock exchanges, investment banks, government departments. Physically, the systems are hosted all over the world, though they tend to be concentrated in financial centres like London, New York, Hong Kong. A capital market can be either a secondary market. In primary market, new stock or bond issues are sold to investors via a mechanism known as underwriting; the main entities seeking to raise long-term funds on the primary capital markets are governments and business enterprises. Governments issue only bonds, whereas companies issue both equity and bonds; the main entities purchasing the bonds or stock include pension funds, hedge funds, sovereign wealth funds, less wealthy individuals and investment banks trading on their own behalf. In the secondary market, existing securities are sold and bought among investors or traders on an exchange, over-the-counter, or elsewhere; the existence of secondary markets increases the willingness of investors in primary markets, as they know they are to be able to swiftly cash out their investments if the need arises.
A second important division falls between the bond markets. The money markets are used for the raising of short-term finance, sometimes for loans that are expected to be paid back as early as overnight. In contrast, the "capital markets" are used for the raising of long-term finance, such as the purchase of shares/equities, or for loans that are not expected to be paid back for at least a year. Funds borrowed from money markets are used for general operating expenses, to provide liquid assets for brief periods. For example, a company may have inbound payments from customers that have not yet cleared, but need immediate cash to pay its employees; when a company borrows from the primary capital markets the purpose is to invest in additional physical capital goods, which will be used to help increase its income. It can take many months or years before the investment generates sufficient return to pay back its cost, hence the finance is long term. Together, money markets and capital markets form the financial markets, as the term is narrowly understood.
The capital market is concerned with long-term finance. In the widest sense, it consists of a series of channels through which the savings of the community are made available for industrial and commercial enterprises and public authorities. Regular bank lending is not classed as a capital market transaction when loans are extended for a period longer than a year. First, regular bank loans are not securitized. Second, lending from banks is more regulated than capital market lending. Third, bank depositors tend to be more risk-averse than capital market investors; these three differences all act to limit institutional lending as a source of finance. Two additional differences, this time favoring lending by banks, are that banks are more accessible for small and medium-sized companies, that they have the ability to create money as they lend. In the 20th century, most company finance apart from share issues was raised by bank loans, but since about 1980 there has been an ongoing trend for disintermediation, where large and creditworthy companies have found they have to pay out less interest if they borrow directly from capital markets rather than from banks.
The tendency for companies to borrow from capital markets instead of banks has been strong in the United States. According to the Financial Times, capital markets overtook bank lending as the leading source of long-term finance in 2009, which reflects the risk aversion and bank regulation in the wake of the 2008 financial crisis. Compared to in the United States, companies in the European Union have a greater reliance on bank lending for funding. Efforts to enable companies to raise more funding through capital markets are being coordinated through the EU's Capital Markets Union initiative; when a government wants to raise long-term finance it will sell bonds in the capital markets. In the 20th and early 21st centuries, many governments would use investment banks to organize the sale of their bonds; the leading bank would underwrite the bonds, would head up a syndicate of brokers, some of whom might