At the beginning of the 2022-23 academic year, the Economics department encouraged students to participate in a challenge proposed by the Federal Deposit Insurance Corporation (FDIC). This challenge consisted of collaborating with a team of four or five to create a research paper examining the question: What are the expected impacts of higher interest rates in the U.S. economy on the banking sector, and how should regulators respond?

Over the course of two months, a team of four freshmen Economics majors, Charlotte Cann, Abeera Rafique, Devin Aspiotis, and Holly Stewart, mentored by Mark Liu, proposed and developed a research paper to provide a preventative solution. Stewart said, “The FDIC Academic Challenge was a great way to apply my knowledge, build professional skills, and work with motivated teammates.” The team focused on  identifying and solving high-risk individuals’ debt accumulation due to increased interest rates. “This past semester, my team and I participated in the annual FDIC Academic Challenge,” said Rafique. “From this experience, I learned and developed skills in teamwork, gathering raw data to build graphs, and using sources that involve real-world statistics.”Another team member Aspiotis echoed a similar sentiment when he said “My biggest takeaway from this experience from the FDIC challenge was doing and applying research.”

Through the team’s research, they found high rates of financial illiteracy among credit card debt accumulators. They also noticed that banks are less likely to provide loans in risky economic times. To combat both issues, they proposed government investment in financial education. They found that increasing the education of borrowers would help the general population by decreasing the amount of unwanted debt that borrowers hold. The team theorizes that with less debt, people are less likely to default on their loans, and for credit card loans, for which the bank has no collateral, the bank loses the entire amount of the defaulted loan. With fewer people defaulting on their credit loans, more banks should be able to continue operating through recessions. This will reduce costs to the FDIC because they will have to spend less money insuring banks that are unable to stay open as the interest rates increase. Charlottte Cann summarized this saying, “This research opportunity allowed us to get hands-on experience, increased our understanding of the banking sector, and the FDIC’s role in securing the stability of our financial system. Moreover, it was great to come up with policy suggestions to improve the system”

The team from Virginia Tech was selected as one of five collegiate teams nationally to present their findings to the FDIC in Washington D.C this April. “The FDIC challenge has improved my collaborative and data analysis skills, and I am excited to present our findings in April,” said Cann. The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress to maintain stability and public confidence in the nation’s financial system. The FDIC insures deposits; examines and supervises financial institutions for safety, soundness, and consumer protection; makes large and complex financial institutions resolvable; and manages receiverships.In this days of bank failures like the SVB and the possible fragility of other banks, the FDIC's relevance is especially important. Good luck Team Econ - Go Hokies!