Administration officials spent the week trying to reassure global markets and stop the spread of a banking contagion after the most high-profile bank failures since 2008. Markets around the world plunged following the abrupt shuttering of Silicon Valley Bank and the seizure of Signature Bank by federal regulators. Analysts believe that Silicon Valley Bank failed because it funded risky ventures and did not properly account for rising interest rates. Moreover, many attributed the failure of Signature Bank to its reliance on crypto currency.

What explanation did some Republicans give as the reason SVB failed?

Instructors: click the link below to download this week’s lecture for use in your classroom. The deck contains a writing prompt and a debate question as well as other assessment questions.

Download: CQP_Lecture_Spark_PPT_Government Seeks to Avert Banking Crisis

Videos

News Articles

Bank failures: Anger in Congress, but division on what to do

Associated Press

3/18/23

https://apnews.com/article/bank-failures-silicon-valley-signature-congress-619c8075506a70eaada02223af39109e?utm_source=homepage&utm_medium=TopNews&utm_campaign=position_07

Global banking crisis: What just happened?

CNN

3/17/23

https://www.cnn.com/2023/03/17/business/global-banking-crisis-explained/index.html

Analysis: Bank panic raises specter of 2008, may bring lasting change

Reuters

3/18/23

https://www.reuters.com/business/finance/bank-panic-raises-specter-2008-may-bring-lasting-change-2023-03-18/

Is it a bank bailout? On SVB, White House fights comparisons to 2008 as Biden confronts bank crisis

USA Today

3/16/23

https://www.usatoday.com/story/news/politics/2023/03/15/president-biden-fights-bailout-comparisons-2008-amid-bank-crisis/11477422002/

Will Americans end up paying for bank failures?

PBS

3/17/23

https://www.pbs.org/newshour/economy/will-americans-end-up-paying-for-bank-failures

Treasury Secretary Yellen says not all uninsured deposits will be protected in future bank failures

CNBC

3/18/23

https://www.cnbc.com/2023/03/16/svb-signature-bank-failures-yellen-says-us-banking-system-is-stable-and-deposits-remain-safe.html

Biden faces massive political risks from banking turmoil

CNN

3/17/23

https://www.cnn.com/2023/03/17/politics/biden-bank-turmoil/index.html

Banking system on the verge of a ‘Bear Stearns moment’: Former FDIC chair

Fox Business

3/17/23

https://www.foxbusiness.com/politics/banking-system-verge-bear-stearns-moment-former-fdic-chair

Assessment

Writing: Explain why President Biden faces such a perilous choice in response to the current bank crisis. What mistakes from 2007 – 2008 does the president want to avoid repeating?

Debate: Should banks be allowed to fail without government intervention?

Poll: Should the F.D.I.C. insure more than the current $250,000?

Short Answer: Why do banks depend so much on the people’s trust?

News Quiz

True/False

Janet Yellen was Federal Reserve Chairman during the last financial crisis. (T/F)

The F.D.I.C. was established during the Great Depression. (T/F)

The Federal Reserve said that banks had borrowed about $300 billion in emergency funding in the past week. (T/F)

Multiple Choice

How much money is in the Deposit Insurance Fund?

1. 10 billion
2. 50 billion
3. 100 billion
4. 500 billion

Goldman Sachs said that growing stress in the banking sector has boosted the odds of a/n _________.

1. depression
2. recession
3. economic boom
4. stagflation

What is the name of third U.S. bank that almost failed before an infusion of deposits saved it?

1. JP Morgan Chase
2. Bank of America
3. First Republic
4. Midwestern Bank