Locals 'gritting their teeth' for impact of Wall Street bailout
Podcast Episode
Kyle Geissler talks with Janesville Gazette reporter Kayla Bunge about how some local residents are reacting the turmoil on Wall Street.
JANESVILLE — Susan and Eldyn Dorst have pulled much of their money from the stock market.
Susan, 64, and Eldyn, 70, Janesville, had plans to use the money to travel after they retired. But after the market's rollercoaster ride last week, they pulled everything out except money in their 401(k) plans.
"We lost quite a bit, and now it's like we're starting over," Dorst said Wednesday.
The Dorsts are among those watching home values decline, retirement accounts tank and expenses increase while financial officials in Washington work out a $700 billion plan to rescue Wall Street.
Susan said getting stuck with the bill for the bailout would hurt.
"I think we're in trouble," she said. "I understand why we're bailing them out, but somewhere along the line, we as regular people have to eat all that up."
The goal of the bailout is to stabilize a financial system greased by credit. Without such a plan, the economy might collapse further.
But to relieve Wall Street of its debts, average people over time might have to pay thousands of dollars in taxes.
"My kids and grandkids are going to end up paying for it," Dorst said.
The chaos on Wall Street already has significantly cost ordinary people during the extreme up-and-down of the stock market.
Jeff Quinn, 47, of Janesville said the hit to average folks is enough to make him nervous.
"It's worrisome, definitely," he said. "All those gains you had have gone away. I guess I have, what, 20 years to contribute, but even that's hard now."
Quinn said he's not certain if he believes the promise that the stock market will recover with time.
"Will that all come back? They say it will," he said, "but I don't know."
Others take a more pragmatic approach.
Tom Haas of Janesville said the bailout plan is a bitter pill.
"I think it's one of those ‘grit your teeth' things," he said. "We need to prevent any further slide or decline in the market and the economy."
The 50-year-old pathologist at Mercy Hospital said people shouldn't be quick to abandon their investments in the wake of turmoil on Wall Street.
Haas said he's not making any drastic moves, just keeping a close eye on the markets.
"In the last week, we've watched the market bounce up and down a total of 2,000 points, he said. "In the long run, it'll stabilize, probably with an overall slight decline."
Sep 26, 2008 at 9:08 a.m.
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My plan? I think my time here is better spent telling you why yours is insane. Who owns your mortage? Not your local bank (if it is a conventional instrument) - probably Fannie or Freddie or a larger bank that's possibly tanking. To tell these institutions, most of which under regulator control, that they won't have any income for ten months - according to your plan would CRUSH them financially. I don't see why you don't get that. Mr. Joe Citizen will have a handful of months to catch up on other bills as more banks collapse, businesses close and the dollar continues to devalue.
Our financial markets need an infusion of cash to slow, if not, stop the catastrophe. You can point fingers at the big banks all day long but the bottom line is that regulators are doing their absolute best to comb loan portfolios and call out the banks that are making bad loans and using predatory lending tactics. It's time to learn from our mistakes and move forward with controls in place that fit our new and changing economy.
Sep 26, 2008 at 12:59 a.m.
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ListenToMe … Quote --- “Oh yea, and $700 billion fixes the "basic infrastructure of our financial markets"?
Unfortunately, based on today’s accounting rules it will. Currently financial institutions are required to have X-dollars available for every Y-dollar loaned. Many of these institutions are holding real-estate based paper or securities; as the housing market continues to fall (more sellers than buyers). The equity initially held on these investments dries up and the institutions X-dollars must increase to maintain the required threshold. The increase of required X-dollars ratio reduces the available Y-dollars these institutions have available to provide to individuals and companies requiring capital for expansion or purchases (you to buy a car or a company to buy equipment). Without an infusion of cash for these lending institutions the economy will tumble into deep spiral that nothing will be able to stop. The cash infusion can either be public or private funded. The only way at this time to get further private funding is to ease capital gains taxes (reduce the risk for the investor).
Sep 25, 2008 at 6:03 p.m.
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Oh yea, and $700 billion fixes the "basic infrastructure of our financial markets"? Yea right.
Sep 25, 2008 at 5:58 p.m.
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I must have missed in your post the plan you support. Oh that's right, probably the one that gives $700 billion to the banks. And where does that leave Joe My Mortgage Is Killing Me Citizen? Still in debt.
Or maybe it's the notion that the government should buy this worthless debts? Hey, why don't we use Social Security funds for that? When all the debts tank, guess we don't have to worry about saving Social Security then. So Joe "My Mortgage Is Killing Me" Citizen is saved now, but he's gonna pay for it later because his Social Security is gone.
My plan puts money right into the bank's hands which can then be turned around for more loans or refinancing. On a mortgage of $1,000/month, my $10,000 buys them 10 months of time to take care of their affairs.
Oh yea, what was your plan confidentWIgirl?
Sep 25, 2008 at 5:19 p.m.
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ListenToMe: you don't really sound educated enough on the financial crisis to comment. Giving every person with a mortgage a credit would do nothing to right our economy. Do you not understand that Freddie Mac and Fannie Mae are now under government control? Who do you think ultimately owns your mortgage? If the basic infrastructure of our financial markets is colapsing, how will anyone be able to refinance a mortgage or sell a home? What will those homes be worth as the dollar continues to tumble in near free fall?
Sep 25, 2008 at 4:45 p.m.
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Instead of giving the money to the fat cat bankers and their companies, give the money to people (we're paying the bill anyhow). Give everyone that has a mortgage a $10,000 credit on their mortgage account and the option to refinance through HUD, VA, or even a private lender. Mortgages can easily be tracked be the 1098 IRS the banks file for interest and the money transferred directly from the government to the bank mortgages. The banks get money to reloan out. The people may keep their heads above water to buy time to sell the property or at least look at refinancing. It would benefit more parties, accomplish the same thing, and probably be cheaper than $700 billion.
Sep 25, 2008 at 3:12 p.m.
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If you have a diversified portfolio and re-evaluate periodically you don't get stuck with a dog stock.
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That's investing, though. The real impact of this will be in seriously restricted credit, which will impact the ability of small businesses especially, leading to slow job creation. Expect a prolonged recession.
Sep 25, 2008 at 3:09 p.m.
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How has everyone on here done in the market anyway? I moved a lot of my stuff to the big banks.Bank of America, JP Morgan, Wells Fargo, ext; right after the big collapse of Bear Stears a few months ago. Just figured they were beat down from the panic of Bears going under. All the big bank stocks are still way up even with all this recent turmoil. I got in on Bank of America at around $20 a share, and it's up to around $35 now. Plus that stock pays a big dividend (7-8%). Nothing wrong with being invested in the big banks. The strong will survive this mess, and they all pay nice dividends.
Sep 25, 2008 at 2:54 p.m.
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Only problem is you don't know if this is the low point. Lot of people kept holding Enron, MCI, dot coms, ext thinking that it would eventually come back.
Sep 25, 2008 at 10:57 a.m.
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Both in 1990 and 2006 the market had huge swings - within six months, the market was up 23% and 17%, respectively. No one knows how long it will take this recent nutty market to recover - however, what we do know is that it will - pulling money out is a mistake - if money is needed for travel or living or whatever within 1-2yrs, it shouldn't be invested in the market. That's investing basics 101.
Sep 25, 2008 at 10:41 a.m.
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Precisely, Devilsadvocate. They received very bad advice or none at all. Common-sense investment rules (such as the Gazette's syndicated columnist Humberto Cruz) would always say, first, if you need the money soon it should not be in the market, and second, if you experience a loss that is the worst time to quit. Instead you should rebalance your portfolio at regularly scheduled intervals to match your desired level of risk.
Sep 25, 2008 at 10:37 a.m.
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People should realize that you only lose the money if you pull it (unless the company goes bankrupt). And if you can't afford to be putting money in the market, you shouldn't, you only add to the problem. That is one of the problems accounts like Scottrade, Ameritrade, etc. have caused. It's all about what your liquidity needs are and budget planning.
Sep 25, 2008 at 10:12 a.m.
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Pulling all your $ out of the market at a low point, only freezes the loss. Something to think twice about.
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