A Teacher's Guide to the Recent Bank Failures

The Failure of Silicon Valley Bank

Silicon Valley Bank failed in part because of a lack of risk management by the bank. This occurred at the same time the central bank of the United States, the Federal Reserve, was issuing warnings about rate hikes, and the supervision capacity of financial regulators was eroding.

As a result of regulatory rollbacks in 2018, banks like SVB had less supervision so when they made risky decisions the government didn’t intervene. The financial system is so interconnected that when one bank fails, it can set off a chain of other failures unless critical steps are taken.

The Federal Reserve is one of the bodies tasked with taking these critical steps. With the failure of SVB, the Federal Reserve now finds itself managing the conflicting challenge of calming a nervous banking system while fixing inflation.

Use this quick overview of the Federal Reserve to explain how this will be accomplished.

What is monetary policy and why does it matter?

Monetary policy refers to the tools that central banks use to influence the amount of money in an economy. These tools help keep inflation—the price of goods—in check and unemployment low.

Use this introductory video to explain how our financial system works and the different types of monetary policy it employs.

And take a look at the video How Money Works: A Look At Monetary Policy.

Global Consequences of a Global Economy

How is it that the failure of a single U.S. bank in 2008 set off a chain reaction across the world? Teach about this phenomenon using a lesson on financial contagion and its global consequences.

The health of our economy affects all aspects of everyday life, so it is important for students to understand the basics of the global financial system.

These resources can provide you with the tools you need to help students understand and navigate our complex world.