Hun School Students Learn the Language of Money in Microeconomics Class

Collateralized debt obligations (CDO), credit default swaps, and the securitization food chain were just some of the terms covered recently in the Hun Upper School’s microeconomics class. 
Students from sophomores to post-graduate level were learning the ins and outs of the subprime mortgage disaster that led to the 2008 global financial crisis. Though the terms might be complex to some, teacher Robert Sacco held students’ interest by assigning various class members parts in the drama (“Ava, you’re an investment banker,”) employing the documentary Inside Job, and practicing the kind of collaborative, experiential learning that is common at Hun.
 
Mr. Sacco is a history and global studies teacher who had a twenty-year business career with companies such as Johnson & Johnson, and as an entrepreneur. He teaches the half-year class with an eye on conveying concepts such as supply and demand, incentives, externalities, speculative investment, real estate and stock market “bubbles”, and others.
 
“Studying the subprime mortgage crisis enables students to apply all of the principles they’ve learned about, and also provides an opportunity to discuss business ethics,” said Mr. Sacco.  “I begin by pointing out that all of this was legal, and the students say, this couldn't have been legal.”
 
Students expressed shock and surprise at the explanation they unwound with Mr. Sacco, including the definitions of CDOs (giant bundles of mortgages that investment bankers then sold to investors such as pension funds); credit default swaps (another derivative used to bet against a certain investment, like CDOs and make money when that investment failed); and the securitization food chain (the flow of money from home owners to banks that lent them mortgages, to investment banks that bought these mortgages, and to investors who purchased these mortgages in giant funds.)
 
“It seems so unreal and crazy,” said Charlie White, a sophomore in the class who role-played a low-wage worker allowed to take out a subprime, risky mortgage for his $750,000 home, and who is considering a college major in economics. “It’s crazy that no one saw it coming and that it was just allowed to happen.” 

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The Hun School of Princeton is an independent, coeducational, private day and boarding college preparatory school.  Student-centered, hands-on learning prepares students for the global community in which they will live and work.

176 Edgerstoune Road, Princeton, NJ 08540  |  Phone: (609) 921-7600 | Email: admiss@hunschool.org