Students will be able to:
- Learn the incentives behind why and how banks choose to loan out mortgages.
- Understand how Wall Street practices incentivized subprime mortgages and contributed to the housing bubble.
- Get a first-hand feel for how the housing bubble grew and then burst.
- Understand the impact of the collapse of the housing industry on banks, individuals, and the economy as a whole.
In this economics lesson, students will learn about incentives behind bank loans.
Want to teach your students about the Great Recession of 2008 but not quite sure where to start? Economists are still trying to pin down just what happened, but one thing that seems clear is that securitization was a big part of it. But what is securitization and how did it play out in the Great Recession? This simulation, which takes place over a full class period, demonstrates just how securitization works and how certain securitizaion practices by banks and Wall Street contributed to the financial crisis. Along the way, students learn about banking, credit, and interest.