How it works
In the made-up town of Brickton, prices kept rising, so families borrowed to buy houses, paying the loan back a little at a time.
Ana the lender bundled many loans into one parcel and sold it to Cy, so she had coins to lend again. The parcels passed along a long chain.
Then house prices fell, some families could not repay, and nobody knew which parcels held the shaky loans. Everyone doubted every parcel, and lending froze.
This happened for real in 2008. Many things played a part, and many people lost jobs. Afterwards, new rules asked lenders to check borrowers and keep more coins in reserve.
Worked examples
How much was borrowed?
- The house costs 10 coins and the family saved 2.
- They borrow the rest: 10 ā 2 = 8 coins.
- They pay it back a little at a time.
A house worth less than its loan
- The family owes 8 coins.
- Prices fall, so the house is worth 6 coins.
- The house is worth 8 ā 6 = 2 coins less than the loan.
- That is a heavy worry for a family.
Why a parcel can lose worth
- Ana bundles many loans into one parcel and sells it to Cy.
- If many families stop repaying, the parcel is worth less.
- Nobody knows which parcels hold the shaky loans, so everyone doubts every parcel.
- Lenders stop lending, even to each other: lending freezes.
After the crash
- Governments stepped in to steady the lenders and keep loans moving.
- Recovery took years, and some places took longer than others.
- New rules asked lenders to check a family can repay, and to keep more coins in reserve, for a rainy day.
A taste of the worksheets
These are some of the questions on the sets. The printable sheets have more and an answer key.
- Circle every part of how the chain of loans broke. House prices fell / Rain stopped the builders / Shaky loans were hidden in parcels / Families stopped wanting homes / Everyone doubted every parcel
- True or false? Cy says: the crash had exactly one cause. Is Cy right?
- Why is a chain of loans only as strong as its weakest link? Every loan is the same size / Trouble in some loans passes along to lenders far away / Lenders only lend to friends
- Which one is not true about Brickton and the crash of two thousand eight? š Ana did it on purpose to hurt families / šļø House prices began to fall / š§ Lenders stopped lending, even to each other
- Which one is not true about Brickton and the crash of two thousand eight? š”ļø A parcel is worth the same however its loans do / š A loan must be paid back, a little at a time / āļø A house can be worth less than its loan
Words to know
- loan
- Money borrowed and paid back, usually a little at a time.
- parcel
- Many loans bundled into one and sold.
- lender
- Someone who lends coins, like Ana.
- reserve
- Coins a lender keeps for a rainy day.
- lending froze
- Lenders stopped lending, even to each other.
Watch out for
- The crash did not have just one cause. Loans nobody could repay were a big one, but many things played a part.
- The story shows how a chain works. It is not about who was bad.
- A house price that rises does not always keep rising. It can stop and fall.
- A parcel is only as good as its loans. If the loans fail, it is worth less.
Try it
A house costs 10 coins and a family saved 2. How much do they borrow?
8 coins. 10 ā 2 = 8.
A house is worth 6 coins and the loan is 8. Is the house worth more or less than the loan?
Less. 6 is less than 8, by 2 coins.
Why did Ana sell the parcel to Cy?
To get her coins back to lend again. Cy paid coins for the parcel.
In what year did this happen for real?
2008. The crash of 2008.
For grown-ups
With a grown-up, ask what they remember about the crash of two thousand eight. How did people feel?
Many people lost jobs in 2008, and it was a hard time for many families. If your child asks about your own family's story, share what feels right and keep it calm: the point is how a chain of promises works.