Teaching Tip: Explaining the Beginning of the Financial Crisis

The financial crisis that began with the downfall of Bear Sterns in 2009, which led to the death of Lehman Brothers, which in turn led to the stock market crash followed by the recession is complicated to say the least and difficult to simplify and bring down to a level that all students can understand.  I have found one way to do this and to keep the students’ attention is through a three-part video series from The Wall Street Journal titled “The End of Wall Street.”  Each of the videos is about seven to nine minutes long so they provide a short break during the class lecture and at the same time help to explain a very complicated event.  I use them in three successive classes.  I play the video in the middle of the lecture and find that this invigorates the class a bit.

The first video, “What Happened,” looks at the problems caused by “easy money” — low interest rates and increased borrowing, and the circumstances that caused the housing bubble to inflate and then burst.  The second video, “Why It Happened,” takes a look at all the different participants in the bubble, home owners,  investors, corporate boards, fund managers and mortgage lenders.   It examines the roles they all played as they helped fuel the bubble, and as they created hard-to-understand derivatives that in turn caused great damage.  The final video, “What Happens Next,” looks at the $700-billion bailout, and all of the uncertainty that lies ahead.

This video series is based upon the book, The Wall Street Journal Guide to the End of Wall Street as We Know It by Dave Kansas of The Wall Street Journal, and, if you’re interested, there is an excerpt from the book available from NPR.  You can also provide your students a “listening” assignment – send them to the NPR interview with Dave Kansas – it lasts just over 4 years.

 

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