LaGuardia High School
Economics
Social Studies Dept.
Mrs. Hatlen
Spring Break Assignment – Due Thursday 4/4/13
This will count as a Test Grade for the 2nd Marking Period!
There are two parts to your Spring Break Assignment. Answer the questions for each part by handwriting or typing the
questions AND your responses.
Part I
Answer the following questions based on the reading (see website for .pdf file). Your answers should be 5 or MORE
sentences. You should make several references to the statements made by each person, to explain your answer.
1. According to Charles Duhigg, what was the root of the crisis?
2. a) According to Sheila Bair, how did “predatory lending” play a role in the origin of the crisis?
b) Where was the risk, and why?
3. According to Adam Davidson, why was this a world problem, and not just a local issue? (8 or more sentences)
4. According to Chris Dodd, how is the economic system like our circulatory system?
5. According to Martin Feldstein, why did the credit (lending) markets freeze up?
6. According to Barney Frank, how did the House Financial Services Committee attempt to solve the problems with
subprime mortgages? Do you think it could have stopped the meltdown?
7. According to Mark Gertler, why does it take a crisis to get reform?
Part II
Review the PBS Frontline episode “Inside the Meltdown” (http://www.pbs.org/wgbh/pages/frontline/meltdown/view/)
and answer the following questions in 5 or more sentences (unless otherwise noted). If you want to use the readings,
please cite the author in your answers with his or her last name in parenthesis.
1. Why did Bear Stearns play such an important role in the start of the meltdown? (Answer in one paragraph of 8 or
more sentences and cite references to the show)
2. Why was there “systemic risk” with Bear Stearns and its potential failure?
3. What is “moral hazard”? Why was Secretary of Treasury Henry Paulson afraid of this? How did he apply it to Bear
Stearns? http://www.pbs.org/wgbh/pages/frontline/meltdown/themes/bear.html
4. Who were Fannie Mae and Freddie Mac? How were they failing?
5. What does “nationalize” mean? How did the government nationalize Fannie and Freddie?
http://www.pbs.org/wgbh/pages/frontline/meltdown/themes/fannie.html
6. Should Lehman Brothers have been allowed to fail? Explain in 12 or more sentences. (In your answer, consider what
happened after Lehman’s failure.) http://www.pbs.org/wgbh/pages/frontline/meltdown/themes/lehman.html
7. Why was AIG saved? (Consider the “systemic risk” tied to this company.)
http://www.pbs.org/wgbh/pages/frontline/meltdown/themes/aig.html
8. What were some of the reasons why Congress did not initially pass the “bailout bill”? Why was it eventually passed?
9. How did the US government intervene in the business of the 9 major banks? Do you think that it was a good idea for
Paulson to direct this significant intervention, in spite of his belief in “moral hazard”? Explain in 8 or more sentences.