Savings and Loans Crisis Essay Example for Free

Savings and Loans Crisis Essay INTRODUCTION In the 1980’s, the savings and loan (SL) industry was in turmoil with the watershed event of this being the implementation of price fixing legislation in favour of home ownership in the 1930’s. Even though it was the basis of the crisis, the trigger lies in more fundamental concepts, including fiscal policy, mismanagement of assets and liabilities, pure imprudence by SL institutions, brokered deposits and the cyclicality of the regulation/deregulation process and this was fuelled by economic reactions such as inflation. It would be ‘unfair’ to attribute it to only one factor. Therefore, to properly investigate the crisis and with a view of having all round perspective of the crisis, this report will discuss this financial disaster’s main causes. The impact of the crisis was borne mostly by the SL industry, the savings and commercial banks in the US and more generally, the US economy. This report will further cover the corrective measures undertaken by regulators and the government with the aim of saving the SL sector as the number of institutions with worsening financial conditions steeply increased. The consequences of this crisis persisted until the early 1990’s and this long term effect is understood by analysing the regulations enacted in the aftermath of the crisis. The main turning point has been the enactment of the Financial Institutions Reform, Recovery and Enforcement Act in 1989. Finally, there are essential lessons to be learned from the SL crisis, not only for the SL institutions, but also the banking industry, regulators and the government. CAUSES In the 1930s the SL industry was a conservative residential mortgage sector surrounded by legislation put in place during that period to promote home ownership. At the same time it has its own regulator which is the federal savings and home loan banking loan, and its own insurance firm to insure deposits at SL institutions. However the regulatory and interest rate environment started to change dramatically as from the 1960s when congress applied the Regulation Q to the SL industry by putting a ceiling on the interest rate that SLs can pay to depositors. The purpose was to help thrift institutions to extend interest rate ceiling to them in order to reduce their cost of liabilities and protect them from deposit rate wars since there were inflationary pressures in the middle till late 1960s. Regulation Q was price fixing, and in trying to fix the prices, Regulation Q caused distortion where the costs outweigh any benefits it may have offered. Regulation Q created a cross subsidy, passed from saver to home buyer, that allowed SLs to hold down their interest costs and thereby continue to earn, for a few more years, an apparently adequate interest margin on the fixed-rate mortgages they had at that recent past years. The problem was that the SL industry was not competing effectively for funds with commercial banks and securities market leading to large things in the amount of money available for mortgage lending. The ceiling on interest rate that SL could offer to depositors as per the Regulation Q led dampening of competition for depositors funds between bank and SL. But as new money market funds began to compete fiercely during the 1970s for depositors’ money by offering interest rates set by the market, SLs suffered significantly withdrawal of deposits during periods of high interest rates. This caused outflows from financial institution into higher yielding investment such as capital market instrument, government securities and money market funds. This process is known as disintermediation. Disintermediation has several undesirable consequences. Most important, it both restricted the availability of credit to consumers and increased its cost, particularly for home mortgages, the same consequences affected small and medium sized businesses that did not have access to the commercial paper market. In additional, because normal cash outlays increased to meet deposit withdrawals while cash inflows decreased as new funds were diverted to alternative investments, disintermediation slowed the growth of financial institutions and caused them liquidity problems. To have the cash available to meet withdrawal demands, banks and thrifts were often forced either to borrow money at above-market interest rates or to sell assets, often at a loss from book value. At the same time, rise in oil prices in 1979 pushed inflation and headline interest rates up. Growing inflation in the 1970s received two huge boosts: the first comprised the late-1973 and 1979 oil shocks from OPEC (the Organization of Petroleum Exporting Countries). Soaring oil prices compelled most American businesses to raise their prices as well, with inflationary results. The second boost to inflation came in the form of food harvest failures around the world, which created soaring prices on the world food market. Again, U.S. companies that imported food responded with an inflationary rise in their prices. In order to combat the increase in inflation, there was a rise in interest rates to encourage people to save and spend less. The Federal Reserve opted for tightening monetary measures in reaction to inflationary concerns. As a result of the subsequent monetary tightening, interest rates rose abruptly and significantly. Interest rates soared from 9.06% in June 1979 to 15.2% in March 1980. Such drastic change in base rates caused the yield curve to become inverted. The spread between the 10 year Treasury bond and the 3-month T-Bill became negative as seen in the table below reaching 373 basis points in 1980. (http://www.milkeninstitute.org/pdf/InvrtdYieldCurvesRsrchRprt.pdf) The graph below shows the variation of US Treasury three-month T-Bill. The large rise and the volatility of short term interest rates is evident from the graph. (http://www.milkeninstitute.org/pdf/InvrtdYieldCurvesRsrchRprt.pdf) The following 10-year Treasury against the effective Federal Funds Rate spread also illustrates how the yield curve inverted during the SL crisis. (http://www.milkeninstitute.org/pdf/InvrtdYieldCurvesRsrchRprt.pdf) With high volatility of interest rates during these periods, the SL industry failed to tackle the risk inherent in the funding of long term, fixed mortgages by means of short term deposits. In other words, there was a mismatch of asset/liability with a negative gap and rising short term interest rates. Aftermath In the1982’s, to attempt at resuscitating the SL industry, Congress tried to deal with the crisis by enacting the Depository Institutions Deregulation and Monetary Control Act in 1980 and the Garn-St Germain Depository Institutions Act in 1982, allowed lower capital requirements, which were based largely on book values rather than more market-value oriented techniques, grossly overstate the health of financial institutions. Regulators relaxed regulatory restrictions by decreasing the net worth requirement from 4% to 3% of total deposits, with additional flexibility of not complying with the generally accepted accounting principles (GAAP). The process of deregulation further included the extension for the period of amortisation of supervisory goodwill and the Bank Board removes the specific limitations for the SL shareholders, changing the minimum 400 shareholders restriction to only one, with no one shareholder or group holding more than 10% and 25% respectively and the acceptance of means of payment other than cash. In particular, rules on net worth changed so that thrifts could continue to operate even at historically low levels. Also, â€Å"supervisory goodwill† was used to balance out the books in terms of capital requirements and accounting numbers. This goodwill had no economic sense and simply helped to compensate any institutions, in a merger, when taking over economically impaired assets of insolvent institutions. All in all, the changes in accounting and capital treatment of supervisory goodwill enabled SL’s to post stronger accounting and capital numbers even though the underlying economic situation had deteriorated. There was a cancellation of the ceiling of the loan to value ratio as well. Forbearance or the decline in regulatory oversight was also a major factor of the debacle. Most importantly, savings and loan interest rate ceilings were removed. SL’s had a large proportion of variable rate liabilities (deposits) funding fixed-rate assets they held 84.5% of their assets as home mortgages. These institutions had a negative GAP as the amount of RSL was larger than that of RSA. GAP = RSA RSL Therefore, they were exposed to any rise in interest rates as the yield on the assets were fixed while the cost of liabilities increased. With the rapid increase in base rate in the 1980’s, FI’s cost of RSL rose faster than they could adjust their return on their assets. They had to maintain a high level of interest paid on deposit to avoid deposit withdrawal. The Net Interest Income – the difference between interest on assets and cost of liabilities decreased significantly. NII = Asset Return – Cost of Liabilities On average, the returns on home loans were 9% with an average deposit rate of 7% which implied a 2% net interest income. Given the tight regulations surrounding the SL’s, these institutions relied in the 2% net interest income as their main source of income. However, as the base rate rose dramatically, the NII dropped to negative figures, reaching -1.0% in 1981. Many institutions lost huge amounts of money. Savings and Loans specialised in originating and holding home mortgage loans that were relatively long term assets with fixed interest rates. However, these were funded by relatively short term deposits whose interest rates were variable. There was a maturity mismatch that was exposed to risk of interest rate rise. With the market value of the assets being more volatile because of its longer maturity, and as a consequence a longer duration, the rise in interest rate decreased the value of the mortgages to very low levels. The value of the liabilities decreased as well but to a smaller extent. Since net worth is the difference between market value of assets and market value of liabilities, this led to negative equity of financial institutions. Δ E = (DA DLg) x A x Δr/(1+r) Since DA DLg, with Δr 0, change in net worth value ΔE is negative. The leverage adjusted duration gap between the assets and liabilities was so large and with a large rise in interest rate, the equity value decreased to being negative. By the early 1980s, savings and loans throughout the country were insolvent by about $110 billion and the fund was reporting only $6 billion in reserves (Barth, 1991; Brumbaugh, 1988; Kane, 1989) The legislation also allowed savings and loans to begin to diversify into commercial real estate loans and other loans commercial banks could already make. Congress hoped that if SL’s invested in riskier, and thus, higher yielding assets, they would be able to offset the loss they previously made. The savings and loans were also allowed to originate adjustable-rate home loans. By 1983, most SLs were deemed economically profitable but 9% of the SL industry was insolvent. However, the Federal Home Loan Bank Board (FHLBB) and the Bank Board, went ahead with their plan of regulating the industry by imposing a 7% net worth limit for new entrants in the thrift industry so as to promote safe risk management practices and investments. Although all these developments were intended to help savings and loans, they gave rise to a subsequent twist in the crisis. The new changes did indeed allow savings and loans to reduce their interest rate risks but the changes exposed savings and loans to new risks mainly credit risks. While defaults on the home mortgages were low, defaults and associated losses on other types of loans and investments are typically much higher. By combining interest rate risk with credit risk, spread over a wider geographical area, experienced institutions had greater opportunities to choose a prudent overall balance of risk and return. However, many savings and loans began making commercial real estate loans, activities in which they were relatively inexperienced. Since investing in real estate loans entailed unique risks and required specific skills, SL’s eventually made losses on the real estate loans. These credit quality problems are reflected in the net income of the industry plunging once again, but even more than in the early 1980s, when the yield curve inverted. The industry lost nearly $21 billion in 1987 and 1988, and almost another $8 billion in 1989. Many open but insolvent savings and loans had incentives to take excessive risks and â€Å"gambled for resurrection† because of the phenomenon of moral hazard. If ever something turned wrong, the federal deposit insurance fund would bear the losses; yet the owners would reap the rewards if everything went well. The legislation, however, did not change how premiums were set for federal deposit insurance, meaning that riskier institutions and prudent ones were charged the same premium. Actually, the level of insured deposits was raised from $40,000 to $100,000. The new, lower capital requirements and broader opportunities to lend and invest allowed some savings and loan to take larger risks. With federally insured deposits and the ability to attract more deposits by offering higher rates of interest, deeply troubled savings and loans always had ready access to additional funds. Deregulation encouraged increased risk-taking by SL’s. However, in the mid- to late 1980s, with considerable real estate loans and investments, regional recessions struck the USA, which reduced commercial real estate values. In particular, an unexpected plunge in the price of oil in 1986 contributed to recession. To make matters worse, the Congress passed the Tax Reform Act of 1986 that more than eliminated the tax benefits to commercial real estate ownership it had conveyed only a few years earlier. Commercial real estate values fell dramatically as a result. This severely affected the asset value of the SL’s. In 1987, the Bank Board emphasised the importance of capitalisation by imposing a supervisory approval for SLs which engage in investments that are above 2.5 the multiplier of their tangible capital base. The main turning point was the Financial Institutions Reform Recovery and Enforcement Act (FIRREA), restructuring the industry as a whole by setting up the Resolution Trust Corporation which in total resolved or liquidated 747 thrifts, with assets valued at $394 billion, jettisoning both the FHLBB and FSLIC and setting up a new regulatory institution Office of Thrift Supervision. The key to this act was that instead of trying to save the SLs which were barely solvent, it dissolved them and focused on the solvent ones to reform the industry. With the assistance of market fundamentals – favourable conditions of interest rates, the reinstatement of GAAP accounting and real estate market, the industry stabilised. LESSONS LEARNT The thrift crisis had a bailout plan of $153 billion, of which around 80% was financed by taxpayers. The number of institutions in the SL industry receded considerably until 1995 and before then, the ability of the regulators and the government to deal with the crisis was questioned many times. What followed was a series of court battles, corruption charges and major restructuring. Therefore, consequences were substantial enough for everyone to extract some observations and lessons. The starting point of it all was overregulation, which outlined the restrictions and conditions under which an SL would function. That included rigidity of the institutions to be flexible at a time economic conditions were changing and the financial sector was advancing. With fixed interest rates, it proved difficult for the SL to engage in competition as their means of investing was limited. One crucial point is that additional regulations do not necessarily mean fewer risks. SLs had to assume additional exposure to interest rate risk and alongside with banks, they were prevented from optimising their credit risk exposure. The government sometimes does not modify the regulations as fast as the structure of the industry is changing leading to new risks emerging and the cycle goes on. To keep up with advancement, the government has to put in place tighter risk management policies and controls. However, regulators and government should not direct the investment decisions of institutions. Rather, investments should be in line with market and economic forces. At a later stage, the industry was deregulated in order to remedy the situation. However, this translated into a decrease in market discipline as the SLs made high risk investments as they relied on the safety net of federal guarantee to cover any losses. Moral hazard, adverse selection and passive management were noted. Therefore, it exposes the disadvantage of FSLIC at that time which encouraged the SLs to take long-term and unreported risks. The deregulation, reducing the capital requirements, left the thrift industry more vulnerable to economic changes. From the failure of resuscitating the industry, it was deduced that forbearance treatment towards insolvent institutions might not always be the best option as it can lead to a freeze in lending and stifle the economy. One of the lessons from the thrift crisis which has been consistently taken into account over the years was the reliance on capital ratios. During the deregulation period of the crisis, there was no monitoring of the capital bases of the thrifts which ultimately lead to insolvency. From then on, institutions had to follow certain standard capital requirements put in place by regulators. However, this focus proved recently in the credit crunch to be detrimental, showing that banks favour trust and confidence. It is important to realise that capital ratios and other accounting ratios might not reveal the real economic strength of the institution. The crisis led to more disclosure and market value accounting. It has been understood that it would have been best to restrict involvement of public funds as a means of saving the industry. Using state or public funds to buy-out thrifts below value is not in accord with public welfare. A solution would have been to subdivide the thrifts into insured and uninsured ones with varying degrees of supervisory regulations concerning deposits and investments. One lesson learned was the emergence of an adjustable insurance premium rate which became a function of the institution’s regulatory rating, risk and capital levels. CONCLUSION For some years the final bill for the SL crisis remained uncertain. However, it is known now that, the thrift crisis cost an extraordinary$153 billion – one of the most expensive financial sector crises the world has seen. Of this, the US taxpayer paid out $124 billion while the thrift industry itself paid $29 million. The consequences of the SL crisis for the structure and regulation of the US financial industry were profound. The number of institutions in the SL industry fell by about half between 1986 and 1995, partly due to the closure of around 1,000 institutions by regulators, the most intense series of institution failures since the 1930s. The failures prompted an overhaul of the regulatory structure for US banking and thrifts, a shake-up in the system of deposit insurance and implied Government guarantees. Regulators shifted towards a policy of earlier intervention in failing institutions so that the principal costs are more likely to be borne by shareholders than other stakeholders. There was also a shift towards more risk-sensitive regulatory regimes, with respect to both net worth assessments and the payments to deposit insurance funds, while deposit insurance reform made it less likely that taxpayers would shoulder so great a burden in any future crisis. At a wider level, the SL crisis taught politicians, regulators and bankers how misleading rules-driven regulatory and accounting numbers can be in relation to risky bank activities. At different stages of the crisis, reporting of the financial condition of SLs was deliberately selected by interested parties to cover up the true economic extent of the unfolding disaster. It was a risk reporting failure on grand scale that greatly worsened the long term economic consequences fort the ultimate stakeholder: the US taxpayer. REFERENCES 1. Myth: Carter ruined the economy; Reagan saved it. http://www.huppi.com/kangaroo/L-carterreagan.htm [Accessed 31 October 2010 to 18 November 2010] 2. The U.S. banking debacle of the 1980’s : A lesson in government mismanagement http://www.thefreemanonline.org/featured/the-us-banking-debacle-of-the-1980s-a-lesson-in-government-mismanagement/ [Accessed 31 October 2010 to 18 November 2010] 3. Inverted Yield Curve Research Report, Milken Institute http://www.milkeninstitute.org/pdf/InvrtdYieldCurvesRsrchRprt.pdf [Accessed 31 October 2010 to 18 November 2010 4. The Cost of the Savings and Loans Crisis, FDIC Banking Review http://useconomy.about.com/library/s-and-l-crisis.pdf [Accessed 31 October 2010 to 18 November 2010] 5. The SL Crisis: A Chrono-Bibliography, FDIC http://www.fdic.gov/bank/historical/s%26l/index.html [Accessed 31 October 2010 to 18 November 2010] 6. The Savings and Loan Crisis http://wapedia.mobi/en/Savings_and_loan_crisis.html [Accessed 31 October 2010 to 18 November 2010] 7. US Savings and Loans Crisis, Sungard Bancware Erisk http://www.prmia.org/pdf/Case_Studies/US_SL.pdf [Accessed 31 October 2010 to 18 November 2010] 8. Savings and Loans Crisis, FDIC Report Vol. 1 http://www.fdic.gov/bank/historical/history/167_188.pdf [Accessed 31 October 2010 to 18 November 2010] 9. The Economic Effects of the Savings and Loans Crisis, Congressional Budget Office http://www.cbo.gov/ftpdocs/100xx/doc10073/1992_01_theeconeffectsofthesavings.pdf [Accessed 31 October 2010 to 18 November 2010] 10. The Cost of Savings and Loans Crisis: Truth and Consequences, FDIC Banking Review http://fcx.fdic.gov/bank/analytical/banking/2000dec/brv13n2_2.pdf [Accessed 31 October 2010 to 18 November 2010]

Nixon: A Presidential Unraveling Essay -- Government

Corruption in politics has never been more notably observable by the American people than that of the Watergate Crisis. Though Nixon’s involvement of the actual break-in has never been proven, his cover-up of the event and his misuse of Presidential power were clearly established. Over the course of several years, America would bear witness to scandalous events, the first resignation of a President, conviction and imprisonment of twenty-five officials within the Nixon administration, and undoubtedly the most severe constitutional crisis in recent history. In November of 1968, Richard Nixon claims the presidency for the Republicans in one of the closest elections in U.S. history. His election to office was bolstered by the middle-class population who were fed up with the liberal politics practiced by the Democrats. Ironically, Nixon choice of appointments to the cabinet and White House staff were to ensure restoration of â€Å"conservative values and carry out his orders with blind obedience.† (Tindall 1364). Many of the members appointed would be the same brought up on charges during the Watergate hearings. There had been many questionable judgments made by President Nixon during his time in office. One had been on July 23, 1970 when he notified the FBI, CIA, National Security Agency and Defense Intelligence Agency that he had approved a new plan for expanding domestic intelligence gathering that included breaking and entering, opening personal mail and interception of communications between U.S. residents and foreign locations. He claims to have later rescinded the order due to protests by FBI Director J. Edgar Hoover. There has been no clear indication that any of the illegal acts suggested by the president were ever carried ou... ...ity meant to bolster Nixon’s standing for reelection. It is also without question that Nixon knew of the activities and blatantly lied to both the Senate Watergate Committee in addition to the American people. His clear misuse of power prompted a cry for his impeachment as head of our country and an end to the constitutional crisis he incited. Works Cited Tindall, George Brown. "Watergate." America: A Narrative History. 8th ed. Vol. 2. New York: Norton, 2010. 1375-1379. Print. "Watergate I: The Evidence To Date." Time 102.8 (1973): 18. Academic Search Premier. Web. 23 Apr. 2012. "The President Gambles On Going Public." Time 103.19 (1974): 22. Academic Search Premier. Web. 23 Apr. 2012. Hufbauer, Benjamin. "â€Å"Watergate.† The Nixon Presidential Library And Museum." Journal Of American History 98.3 (2011): 790-796. Academic Search Premier. Web. 23 Apr. 2012.

Mexican American Approaches to Health Essay

Mexican American, or Latino, traditional views on health and healing practices are influenced by several other cultures that they have historically had some kind of contact with, such as the Spanish colonizers, indigenous Indian populations, and Western medical practitioners. This varied background accounts for their holistic healing methods and their belief that good health stems from internal balance, a clear conscience, and a strong spiritual relationship with God. The underlying theme in traditional Mexican American health is that there needs to be a balance between the body and Earth’s elements. Equilibrium of each element–fire, water, air, and land–leads to an overall healthy state. (Molina, 1994) Traditionalists tie this balance concept in with the idea that all health states are associated with either hot or cold, and one may be used to heal the other. A state of health is characterized by a warm, wet body, and any exposure to extreme conditions on either side of this scale leads to illness. It is important to point out that the generalizations assumed in this paper are based on very traditional Mexican American individuals and do not span the entire population within the US. In regards to healthcare, traditional Mexican Americans hold the belief that their healing methods are either superior to or the same as those practiced by Western providers, so they tend to rely primarily on home remedies and cultural healers before seeking out other forms of medicine. Furthermore, their healing approach is firmly rooted in their specific values. It is important to be aware of Latino cultural values in order to understand their views on healthcare, as the latter is based on the other. In general, there are three basic values that crucially exists within most Mexican American relationships—personalismo, respeto, and dignidad. (Molina, 1994) Personalismo is the trust and rapport that is established with others. Latin Americans respond better to warm, friendly interactions, and prefer personal relationships to professional ones. Therefore, the best ways to earn trust is for a provider to show interest in the patient’s personal life, exercise empathy, and avoid formal interactions. It is also important for a provider to show respeto (respect) by dressing according to their profession and addressing the patient with the formal greeting â€Å"usted†. This makes the patient feel as through they are taken seriously and cared for at the same time. A Latino patient tends to want a provider to embrace and exemplify their role as a professional; they simply prefer more intimate interactions. And although they appreciate empathy, they expect a blatant regard for their digidad (dignity); as with many individuals, Latinos place an emphasis on being treated as equals and human beings. Furthermore, Mexican Americans value family and thrive off their interdependent relationships with them. (Molina, 1994) In fact, most traditional Latinos rely more on their relatives for health advice than healthcare providers; as a result, it is common for a family member to accompany a patient to their visit with a provider. Mexican Americans’ cultural definition of health is outlined by the three major states that they believe are the causes for all illness and disease. Additionally, poor health is culturally associated with imbalances within the body’s natural states that lead to problems. According to traditional beliefs, poor health can be attributed to one or more of the following: (1) Psychological State, (2) Environment and Natural Causes, or (3) Supernatural beings. (Molina, 1994) The psychological state includes any mental state that may be disrupting one’s peace of mind, including worry, anger, envy, or stress, all of which can lead to the dangerous state of susto (â€Å"fright†), or soul loss. Natural causes fall under environmental elements, such as dust, pollution, or germs–all of the things that Western medicine believes to be the only causes of illness. Finally, supernatural beings include malevolent spirits, witchcraft, or â€Å"mal de ojo†, the bad eye, any of which can cause disease or illness. Because Mexican American views on health differ from those of mainstream US medicine, there are several â€Å"folk illnesses† that exist within the culture that have no diagnosis within Western medicine, and are, therefore, remedied by traditional methods. Many of these illnesses fall under the idea of their imbalance theory. For example, an imbalance or conflict within social relationships opens one’s spirit up to â€Å"mal de ojo†; symptoms include fever, headache, and sleeplessness. The traditional treatment for this is rubbing the entire body with egg yolk. Empacho is an illness characterized by stomach pains, and results from feeling psychological stress while eating. Ataque de nervios literally translates to â€Å"attack of the nerves† and is caused by extreme emotional stress brought on by a traumatic event. Those suffering from this illness often engage in fits of swearing and convulsions. The treatments are praying over the affected individual and rubbing alcohol over their face. Caida is an infant disease that occurs when the fontanelle is dislodged from the child’s skull, and can result in death. (Molina, 1994) In Western medicine, providers may equate this with Sudden Infant Death Syndrome (SIDS), which even in the most skilled American facilities has no biological explanation. Since many of the illnesses recognized in the Mexican American culture are undiagnosed and not understood in Western medicine, a majority of this group employs home remedies or purchases medicines in a botanica, or a store that sells folk medicine and herbal treatments. (â€Å"Profiles of Health†, 1994) Although some recent studies have shown that many Latinos view cost as the number one barrier to healthcare in America, most traditionalists prefer to seek out the assistance of their cultural healers through a healing practice known as Curanderismo. (â€Å"Profiles of Health†, 1994) This practice is one of the most prominent healing practices in the Mexican American culture. It approaches health from a holistic point of view and encompasses physical, social, psychological, and spiritual healing. (Johnston, 2006) A Curandero is a revered, spiritual being that treats those suffering from biologically inexplicable illnesses and can have gifts in several areas, including massage, midwife, counselor, spinal adjustment (similar to a Chiropractor), or espiritualista–someone who channels help from spirits. (Molina, 1994) They specialize in a number of areas of medicine, such as naturopaths, herbalists, palm readers, or psychotherapists. Some research suggests that Curanderos arose out of a need for health care from poverty stricken communities that could not afford it. Traditionally, many sought out the help of Curanderos; however, according to recent studies, very few Mexican Americans utilize the services of a Curandero, and those who do use it as supplemental treatment to Western medicine. The main differences between Mexican American cultural healing methods and Western medicine are the varied definitions of similar illnesses, as well as the explanations for the causes of diseases. However, since most illnesses that are recognized in Latino culture also exist within the framework of American healthcare, then treatment can be applied uniformly. Therefore, the emphasis needs to be placed on cultural competence, which would incorporate a system for understanding other point of views of health. It is imperative for providers to develop both trust with and respect for their patients in order to treat them and to increase adherence to medical plans. Western medical providers must learn to listen to and understand the traditions of the Mexican American patient population so that they will be better equipped to serve them. Once this is accomplished within the American healthcare system, society will see health disparities begin to diminish.

Does Restrictions Influence Perceived Problem Solving...

Discussion The purpose of the present research was to investigate if restrictions influence perceived problem-solving abilities and if those who prefer less restriction would score significantly different on a problem solving inventory (PSI). The results of this study provided little support for the pre-experimental hypothesis. The current investigation utilized a standardized measure to increase validity. The aim of this study was the interrelatedness of perception and problem-solving ability. The PSI reliably measured perception of problem-solving ability. It may have had face validity, content validity, and criterion-related validity for this study, but it was not a valid indicator of other perceptional influences. Similar to†¦show more content†¦For example, in the first study children were asked to sort using one rule and then the other immediately after. One could infer that the children struggled with the constraints of the task and as opposed to performance. Zelezo and Frye (1998) did not distinguish the task guidelines as an imposed restriction. They noted that young children lack the ability to psychologically-distance themselves from the concepts for a larger perspective of context. According to Luria (as cited by Zelezo Frye), it had been a challenge to determine the reason for performance failure without a clear concept of the problem-solving framework in place. In the end, they decided to refocus their research efforts towards the influence perceptions of problem-solving ability had on executive function performance-tasks (Zelazo Frye). The current research was a product of that reasoning; it questioned the influence perception of restriction had on both, respectively. The survey exposed participants to an inventory of perception that was presumably less restrictive for responses juxtaposed to the PSI. The participants were asked to prefer the restricted response or open-response inventory. The open-response section was only used for grouping and responses were not used in the scoring process of this study. However, in retrospect, this too may not have been a valid measure to establish the preference of