Teaching Financial Crises


Table of Contents

  • Front Material
    This document contains the table of contents, introduction and other related material.
  • Lesson 1 - A Comparison of the Panic of 1907 to the Crisis That Began in 2007
    This lesson provides an overview of the similarities and differences between the Panic of 1907 and the financial crisis that began in 2007. Students will assess the financial systems, economic events, and government responses in both periods. They will organize their analysis through a compare-and-contrast organizer. Students will read a summary of events surrounding the San Francisco earthquake of 1906 and Hurricane Katrina in 2005 and resolve a mystery surrounding their impact on the nation's financial system. The students will participate in an oral reading illustrating the abandonment of traditional lending policies in the expansion of credit to 21st century borrowers.
  • Lesson 2 - How Economic Performance From 2007-2009 Compares to Other Periods in U.S. History
    The students examine information and data about six recessions in the United States. In small groups, they use the information to make short presentations about the recessions, highlighting data on economic performance during the time periods, and then they present this information to the class. The students discuss similarities and differences between the various events and guess which years they correspond to.
  • Lesson 3 - Manias, Bubbles, and Panics in World History
    This lesson addresses the psychology surrounding speculative manias, often referred to as bubbles. The class will be introduced to some of the theories behind bubbles and apply those concepts to the recent housing bubble. Students will then be introduced to five bubble events in world history: Tulipmania, the South Sea Bubble, the Roaring Twenties Stock Bubble, Japan's Bubble Economy, and the Dot-com Bubble. Students will participate in an activity to analyze the features of the five bubbles to find similarities. Each bubble era will be assigned a number (1-5) and each student a corresponding number (1-5). The like-numbered students will meet and analyze the basic issues. Then new groups will be formed. The students will acquire information about their bubble from one of the essays in the lesson package and arrange the similarities of these events.
  • Lesson 4 - The Japan Comparison
    In this lesson, students play the role of economic advisors to the U.S. president. They learn about Japan's "Lost Decade," and then they compare economic data and policies to analyze the potential future of the U.S. economy.
  • Lesson 5 - Monetary Policy in the Recent Financial Crisis
    Actions are taken by the Board of Governors of the Federal Reserve System (the Fed) to create a stable macroeconomy. Part 1 of the lesson places the student in the role of an economic analyst diagnosing the economy by viewing 2007-2009 data regarding the Consumer Price Index (CPI), unemployment, and real GDP growth. Students are likely to conclude from their analysis that monetary policy tools were needed to correct for the crisis. In Part 2 of the lesson, students will be introduced to tools historically available to the Fed as well as to new tools created by the Fed. Student teams will serve as members of the Board of Governors and make monetary policy decisions by choosing from among traditional and new tools. Students will evaluate the action by the Fed to pay interest on required and excess reserves held by banks and observe and analyze the effects of the monetary expansion on the Fed's balance sheet. For advanced students, three extension opportunities with supporting materials are provided.
  • Lesson 6 - The Role of Housing in the Financial Crisis of 2007-2009
    Students begin by examining data on the rise and fall of home prices and use supply and demand to analyze potential causes of the price changes. Then students learn about changes in the mortgage industry and identify the incentive effects of these changes. Students take part in a demonstration of the effects of securitization on investing in the housing market. Finally students calculate the costs and benefits of engaging in leveraging.
  • Lesson 7 - The Instruments and Institutions of Modern Financial Markets
    Students work in small groups to make flash cards to display terms commonly used in modern financial markets. Each group of students begins by learning one group of terms. The students pass their flash cards from group to group until everyone has had an opportunity to study all of the terms. The students then play an Instruments and Institutions of Modern Financial Markets quiz bowl game. Finally, students proceed to comprehend these terms in the context of mock newspaper articles. Knowing these terms can help students understand reports about modern financial markets as well as news stories explaining the causes of financial crises.
  • Lesson 8 - Understanding Financial Markets, 2007-2009
    This lesson pulls together the events in financial markets from 2007 to 2009 by examining the persons and financial institutions that played key roles in the crisis, including why it occurred, who was affected, and the aftermath. How better to understand the complexities than for students to ask questions of certain people or entities concerning their complicity involving the crises? Students will do so in a mock trial, where witnesses such as Mr. Wally Banker and Mr. Mainy Street will be called to testify in The People v. Ulysses S. Economy. Because the people have been harmed, they have filed suit against the economy, personified by Ulysses S. Economy, who feels that he is the victim, not the instigator. The defendant is accused on four counts: the deterioration of consumer confidence, the failure to create jobs, the weakening of GDP growth, and the worsening turmoil in the global economy. Students with computer access can link to several sites that highlight the market turmoil. These supplemental sites, along with the trial transcript, will be used to complete an exercise that requires them to place 20 decisions and events that are associated with the 2007-2009 financial crisis in correct sequence, beginning with the changes in banking regulations and ending with questions and concerns beyond 2009. The goal is for students to be able to understand, describe, and demonstrate knowledge of this crisis.

 


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