This video gives a rundown of the financial crisis and market panic created by the collapse of investment bank Lehman Brothers and the Bank of America takeover of troubled Merril Lynch. The deal was considered a life-saving move for Merril Lynch. Unlike the earlier government bail-out of Bear Sterns, Lehman was not saved by the government, a signal to the financial world that failing institutions cannot rely on the government and tax-payers money to dig them out of hard situations.
The first seven minutes of the video work well as a short summary explaining what happened and how the markets are reacting, and to show reaction from the treasury secretary, major players in the finance world and the candidates for president. Financial experts call the recent failure of three of the five major U.S. investment banks a once-in-a-life-time event, a situation that could not have been imagined several years ago.
"We're working through a difficult period in our financial markets right now as we work off some of the past excesses. But the American people can remain confident in the soundness and the resilience of our financial system."-Henry Paulson, Treasury Secretary
"This is probably the most difficult environment in the financial markets that I've experienced in my 30 years in the business."- John Thain, Merrill Lynch Chairman
"The taxpayers are not involved, and I think that was a very important step forward, because if we had had the taxpayers back Lehman Brothers, then it would have just been a slippery slope." -Sen. John McCain, Republican presidential candidate
"Too many folks in Washington and on Wall Street weren't minding the store... The result is the most serious financial crisis since the Great Depression."- Sen. Barack Obama, Democratic presidential candidate
1. What are some of the signs you see that the U.S. economy is struggling?
2. How do banks work? How do you know that if you put your money in a bank, you can always get it back?
3. What is a loan? What happens if someone can't pay a loan back?
1. Should the U.S. government have used tax-payer dollars to rescue Lehman Brothers? Why or why not?
2. How can one investment bank failing cause such a plunge in global markets? What are some factors that might be spreading the impact into other areas of the economy?
3. With the stock market, anxiety and worry about the future can cause an even bigger market drop than a particular event. What should the government or financial experts do to try to calm or relieve the situation? What shouldn't they do?
4. What is your prediction for the economy?
5. How do you think bad economic news affects the presidential campaign? What would happen if the election were tomorrow?