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Wall Street: Reform or Not? In 2008, the American economy suffered a severe downturn after investment banks Lehman Brothers Holdings and Bear Stearns Companies collapsed. Hundreds of billions of dollars of wealth were wiped out in a matter of weeks, and the entire economy was put at risk because banks were afraid to lend and investors were unsure if there was any safe place to invest their savings. Lehman Brothers and Bear Stearns failed because they had invested large amounts of money in high risk investments, and disregarded numerous warning signs that their business practices were not sustainable. After the crash, the U.S. Treasury Department and the Federal Reserve Banks spent trillions of taxpayer dollars (called a “bailout”) to protect more Wall Street investment banks from collapsing as a result of similar mistakes. After the 2008 crisis, many journalists, politicians and economists claimed that the financial industry needed serious reform. They said that the Wall Street investment banks had broken rules by exaggerating the value and safety of their investments. Many claimed that these investment banks were able to get away with dangerous and unethical business practices because of their political influence. Large investment and retail banks donate hundreds of millions of dollars to candidates from both major parties. Furthermore, they often hire former government officials from the agencies that are intended to regulate the banks, like the Treasury Department and the Securities and Exchange Commission. Advocates of the legal reform of Wall Street claim that these practices give investment banks the political influence that enables them to ignore and violate current regulations and that these practices should be abolished or reformed. Advocates for the financial industry argue that these criticism are overstated and do not acknowledge the complex realities of their profession. Many financial professionals argue that they have a free speech right to donate money to any political candidate that they want to, and that they are not able to buy any exemptions from financial regulations. They claim that they hire former government regulators, not to influence government institutions, but because these people are the best qualified for jobs with investment banks due to their experience with regulating the financial industry. Executives at these banks claim that increased regulation of political activity and hiring practices, and more scrutiny of their political donations will not prevent another crisis like 2008, and will only increase the cost of the services they provide to the public. Your job: Create a podcast with a moderator and a panel of 3–4 students to report on and informally discuss one or several aspects of this important topic. Collaborate with your team to read and discuss the prompt, assign research responsibilities and create an engaging, informative podcast about Wall Street Reform . Suggested resources are: Audioboom, Audacity, Podbean, and Buzzsprout. Tipping Point Labs (tippingpointlabs. com) has tips for making an awesome podcast. Podcast Panel and Assignments: __________________________________________________________________________________ __________________________________________________________________________________ PRODUCT PREVIEW
THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY 213
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