Financial Fridays with Julie Pratten – Bailout

Friday 30 January 2015

by Julie Pratten

Welcome to Financial Fridays, your usual helping of buzz words and ideas for Banking & Financial English activities you can use as warmers, fillers or full-blown lessons. This week’s Financial Friday feature covers bailout, another topic which continues to ignite heated debate almost a decade after the financial crisis emerged.

If you have any requests about any particular aspect of banking and finance, we would love to hear from you, so please feel free to post your questions.

This Financial Friday features:

  • BANKING BUZZ – a handful of banking buzzwords. Why not send us your favourites­?
  • FINANCIAL FRIDAY FOCUS: Bailout. Last year Bailout was named “Word of the Year” by Merriam-Webster for getting the highest number of lookups online. Bailout was first used to describe rescue from financial troubles in the late 70s when the US government gave Chrysler an injection of cash. Recently, top bankers have been testifying how they used government bailout funds. It is one of those discussion points that never fails to stimulate debate: Should banks be bailed out with tax payers’ money? Don’t they have insurance funds or reserves to protect themselves from collapse? What systems are in place to protect consumers?
  • BLUE CHIP LINKS – suggestions for further reading and listening material on our featured topic and more.

 

BANKING BUZZ

Select the correct answer, A or B.

1 TARP                                                                                                                                                                                                                  A The term used for the US government’s Wall Street bailout bill.

B Banks that are in trouble and need financial aid to stay afloat.

2 LCR

A A central bank ratio used to calculate the risk of domestic banks’ lending.

B A key reform to strengthen capital and liquidity regulations.

3 FSI

A An institute established by the BIS to assist the strengthening of financial systems.

B A report about a bank that has serious financial stability problems.

4 Contagion

A The spread of market fluctuation and volatility from one country to another.

B An increase in interest rates by a central bank in one country that causes other banks to follow.

5 Plain vanilla

A Standard language used in lending agreements.

B The most basic version of a financial instrument

 

FINANCIAL FRIDAY FOCUS 

Activity 1 Flipped learning

Lead in questions: Bank bailout

●   Give your students these lead in questions prior to a lesson on bailout.

What is bailout? Should banks be bailed out by the government? What are the arguments for and against? How much has bailout cost governments?What precautions are banks obliged to take to safeguard themselves and their investors funds?How can these be strengthened?

Activity 2 Vocabulary guessing  

●   Use this vocabulary guessing activity as a warmer or filler. If your students need a bit of help, you could give them the first letter of each word or write up the missing words.

Look at this short text about bank bailout in the UK.

Some of the words have been replaced with the names of vegetables. With a partner discuss what the missing words could be.

A bank (1) potato package totalling some £500 billion (approximately $850 billion) was announced by the British government in October 2008, as a response to the global financial (2) carrot. This decision comes after a series of major (3) onions in the stock market and concerns about the (4) cabbage of British banks. The plan aimed to restore (5) garlic confidence and help (6) bean the British (7) beetroot system, and provided a range of short-term interbank (8) peppers and (9) cucumbers £50 billion of state (10) cauliflower in the banks themselves.

Activity 3 Discussion

●  Use this thought-provoking reading material to stimulate discussion about what is wrong with the banking system today. ‘The Bankers’ New Clothes’ by Anat Admali and Martin Hellwig highlights weaknesses in today’s banking system. http://bankersnewclothes.com/

Activity 4 Dictogloss

●  Turn the following brief description of the The Bankers’ New Clothes into a dictogloss. Create the dictogloss template by deleting some (or all) of the words. Read at normal speed, then give students time to compare their versions by asking each other questions (● no peeking!) ● You may need to read the text two or three times, depending on the level of your group.

The book ‘The Bankers’ New Clothes’ by Anat Admali and Martin Hellwig highlights what is wrong with today’s banking system. Recent years have illustrated the fact that risky banking practice can damage the economy. However, some bankers argue that a safer banking system would limit lending and slow economic growth. The Bankers’ New Clothes examines this claim and the rhetoric bankers and politicians use to rationalize the lack of reform. The book shows that we can have a safer and healthier banking system and stimulate lending without the high price to society in the last few years. Banks are as fragile as they are not because they must be, but because they want to be–and they get away with it.

●  Follow up with this short video clip of Anat Admali talking about problems in big banks: https://www.youtube.com/watch?v=ZDRpZvCOVrc

 

BLUE CHIP LINKS

Bank bailout figures UK: http://www.financialadvice.co.uk/news/12/ukeconomy/12956/banking-bailout-cost-850-billion.html

Check out central bank speeches here: http://www.bis.org/list/cbspeeches/index.htm?m=2%7C10

About LCR: http://www.bis.org/publ/bcbs238.htm

About reforms to protect bank capital and liquidity: http://www.bis.org/bcbs/basel3.htm?m=3%7C14%7C572

 

Answers:                                                                                                                                                                                                       Banking buzz: 1 A, 2 B Liquidity Coverage Ratio, 3 A Financial Stability Institute, 4 A , 5 B,

Activity 2: 1 bailout, 2 crisis, 3 falls, 4 stability, 5 market,  6 stabilize,  7 banking, 8 loans, 9 guarantees, 10 investment

Copyright Julie Pratten 2015
Copyright this edition Delta Publishing 2015

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