1. Read text introduction and watch the video The Causes of the 2008 Financial Crisis.
Discuss the following questions with your partner:
- What is credit?
- How does credit work in a healthy economy?
- What happens when credit vanishes?
- What makes some loans "riskier" than others?
- Why would anyone make a risky loan" What are the possible payoffs?
- What are the possible drawbacks?
- Is there any investment that one can make that is "risk free"? Explain.
2. Read text introduction and watch the video The 2008 Wall Street Bailout.
Discuss the following questions with your partner:
- How can a bank fail?
- What does it mean for government to "bail out" a bank?
- Why did the US government (under the advice of Secretary of the Treasury Paulsen) decide to bail out some financial institutions and not others?
- What factors might have affected Paulsen's decisions?
- The government eventually agreed to give the banks $700 billion in TARP (Troubled Assets Relief Program). What is meant by a "troubled asset"?
3. Work with your partner to create a Venn Diagram comparing the 1929 Stock Market Crash to the 2008 Financial Crisis. Be sure to consider causes and consequences of each, as well as responses to the crises. Try to fill each space with at least 5 points of comparison.