2007–2008 financial crisis

High school (ages 12+)
History & Culture

Name:

Date:

Step 1 · Read the article

Open the article and read it at the level above. Then answer the questions below in your own words.

https://smallwhale.org/articles/20072008-financial-crisis

Write what each word means, using the article.

Do not copy the article. Write two things you learned, the way you would explain them to a friend.

Answers below are taken from the article’s stored facts, so they match what the student read.

1. What is the primary trigger event?The bursting of the US housing bubble, leading to widespread mortgage defaults
2. What is the key financial products?Mortgage-Backed Securities (MBS) and Collateralized Debt Obligations (CDOs)
3. What caused the Big Money Wobble of 2007-2008?It started when many people borrowed money to buy houses, even if they couldn't pay back. Banks gave these risky loans, called subprime mortgages, and then turned them into complicated products called MBS and CDOs. When house prices fell, many people couldn't pay, and the value of those products dropped, hurting banks.
4. Why did banks stop lending to each other during the crisis?Banks were unsure who owned the risky products, so they feared losing money. Because of this uncertainty, they stopped borrowing from one another, which made it hard for everyone to get loans.

Systemic Risk: The risk that the failure of one financial institution could cause the collapse of the entire financial system.
Credit Crunch: A sudden reduction in the general availability of loans or lessening of the willingness of lenders to extend credit.
Leverage: The use of borrowed money to increase the potential return of an investment, but also increasing potential losses.