The 2008 Financial Crisis

• Economics
• Secondary Education

The 2008 Financial Crisis

What do you
know about banks?

The video is about a man who is not interested in getting a mortgage. He is looking for a new car and a skiing holiday in the Alps. The bank offers him a mortgage, but he declines. The bank then asks him if he would be willing to sell one of his children to keep up repayments. The man is shocked and leaves the bank.

1. True
2. False

The video is about a man looking for a mortgage. He wants to borrow 300,000 pounds over 25 years. The bank offers him a brand new car and a skiing holiday in the Alps. A few years later, the bank asks him if he would be willing to sell one of his children to keep up repayments. The bank finally offers him 10,000 euros based on a 98 percent deposit that he has already given them.

1. True
2. False

Think Pair Share

1. Do you think the broker in the video behaved responsibly? 

2. What are the main differences between the two scenes?

How do banks work?

Banks get money from people who save their money in the bank and also from other banks. They take this money and lend it to different people or businesses, like builders.

2008

During a time called the Celtic Tiger period, banks gave a lot of money to builders to help them build houses and properties. However, in 2008, something went wrong. Builders couldn't sell the properties they had built.

This was a problem

This created a big problem for banks. They were at risk of running out of money, which means they couldn't give back the money to the people who had saved their money in the bank, and they also owed money to other banks in Europe.

Anglo Irish Bank

One bank that faced a lot of trouble during this time was Anglo Irish Bank. It was in such a tough situation that it had to ask for help from the central bank. But here's the catch: the central bank didn't do a good job of making sure banks were being careful with their money. They let banks put too much of their money into one thing, like the property market.

drive.google.com

Lessons Learned

When the property market got into trouble, it affected the banks, and that's why they needed help. This shows us how important it is for banks and regulators to be careful with our money and not put all their 'eggs' in one basket, like the property market.  It also shows the importance of regulations. 

What was the attitude of the Anglo Irish Staff towards their loan books?

1. They behaved responsibly
2. They behaved recklessly

What responsibility
did the Central Bank have?

How might a customer react if the bank runs out of money?

Class Discussion

1. Do you trust banks with your money?

2. What do you think is the role of the media in financial crises?

4. How do you think the Northern Rock crisis affected people's trust in banks?

Homework Task

Research and write a short essay on the role of financial regulation in preventing economic crises.

                                                              -or-

Prepare a presentation on a financial institution's ethical responsibilities during a crisis.