Published: October 01, 2008 04:21 pm      

Locals sound off on economic woes

As elected leaders in Washington debate various solutions to help struggling financial institutions, local bankers and government officials mostly agree that Congress was right in rejecting the proposed Emergency Economic Stabilization Act.

But they also agree that the government needs to do something to prevent further calamity.

After the record single day stock market drop on Monday of this week, Edward Jones Financial Advisor Jeff Binkley says although investors are troubled, they should be considering investment strategies to help stem their losses.

Binkley said although the drop is a significant amount for one day, it was only a 6 percent drop and history has shown the market has been through worse. Since 1900, there have been 32 bear markets — a substantial drop in the market — including the Wall Street crash of 1929 that sent the United States into the Great Depression.

“Bear markets can be frightening and quite dramatic, but they are generally short lived,” Binkley said. “Investors need to stick with quality companies, always diversify among industries and use asset classes such as stocks, bonds, and cash to invest for the long-term.”

Binkley said the market has been in a bear market since last October and effectively turned lower in the past few weeks.

“Investing isn’t as easy as buying when you feel good and selling when you feel bad,” Binkley said. “Markets go up, but they also go down. We’re not market timers. No one can say when we’ll hit bottom or when stock prices will improve. But history teaches us the importance of staying invested in good times and bad, and if appropriate, adding good investments to the portfolio when prices are down.”

The recent market drop is just what happens when the markets get out of balance, he said.

Binkley said he is not surprised with recent events, adding that it is just the market structure. He said he is “pretty proud” of Congress for rejecting the proposed bailout and believes that a bill will pass that will help with the current economic status. It may not satisfy some people, he said, but it will be good legislation.

Investors became so emotionally involved with the market drop that they didn’t even realize that the price of oil dropped to under $100 a barrel on Monday of this week, Binkley said.

“This means more money in your pocket to spend in the economy,” he said. “It’s like giving a worldwide credit because it’s money we don’t have to spend to fill our tanks.”

Nels Ackerson, who’s running for Congress’ Fourth District in Indiana against incumbent Steve Buyer, agreed with Monday’s vote, but added that work remains.

“This is one of the most outrageous examples in our nation’s economic history of a Congress and administration that have failed to address a problem until it became a crisis,” he said. “We’ve had another failure by not providing legislation that addresses the problem in a reasonable way.”

Ackerson admits that a rescue plan of this magnitude isn’t something that can be fast-tracked.

“Congress should not just be patching something together and rushing it out,” he said.

He also understands why public sentiment continues to be against a bailout of any kind.

“There is no justification for saying big institutions that make reckless financial decisions should be rescued by ordinary citizens who have been careful with their money,” Ackerson said.

He blames a lack of regulatory oversight from the feds on Wall Street, as well as an “extraordinarily awful pattern of borrowing and spending that has characterized this government now for the better part of a decade” as reasons for the meltdown.

“That’s put us in a very weakened financial condition, and made it even more burdensome on people because they’re losing their jobs, and they’re seeing inflation in energy and food costs,” Ackerson said.

Buyer’s office did not return a call seeking comment. In a statement released to the media, Buyer said he voted against the measure because it didn’t protect taxpayers or preserve free market principles.

“We now need to work toward a solution that is in the best interest of our country and the economy,” he said.

Indiana State Rep. Gregory E. Steuerwald, R- District 40, said although he doesn’t have a vote in the matter he is glad that Congress denied the $700 billion bank bailout.

“It’s very different using taxpayers’ money to bailout private enterprises,” he said. “To my understanding, there are undervalued assets with those enterprises and in the long run I think there are enough assets to cover their bad debts.”

Steuerwald said he thinks the stock market and individual companies will recover and the free market will take care of itself.

While investments on the stock market have been a consumer worry, another issue that taxpayers are concerned about might be a non-issue in most of Hendricks County. Many bank officials in Hendricks County — including those from Chase, the State Bank of Lizton, and Indiana Members Credit Union — said consumers here needn’t worry about the safety of their money in banks.

Nancy Norris, a spokeswoman for Chase, said that it is important for customers to remember that as long as they bank with an FDIC insured institution, their money is safe.

“Their deposits are FDIC insured, so even if your bank were to bail, as long as you have $100,000 or less, you will get it back,” she said.

Matt Ayers, president of the State Bank of Lizton, said the problems with the economy and the market haven’t affected the bank, except for some consumer confidence issues.

“It affects us primarily by consumers being concerned about the safety of their dollars,” he said. “We’re a highly rated community bank and our assets are at low risk. We’ve never done any type of lending that has gotten the economy into trouble. We don’t do sub-prime mortgages and we require down payments when we make loans. Customers of the State Bank of Lizton are doing business with a very sound community bank that does both commercial retail and agricultural lending. We don’t lose many loans and our assets are very sound.”

As for the rescue proposal, Ayers said it’s a confusing issue and while he’d like to see the government avoid a bailout, a rescue of some kind might be what it takes to make the market settle down.

Indiana Members Credit Union Senior Vice President of Finance Todd Habig said though some of their members have been concerned, he’s hoping the process will restore confidence in the banking world.

“It has not affected us,” he said. “We’ve always been so conservative, we don’t make sub-prime mortgages and we have no risky investments, so we have really not been affected, but I think there will be consolidation in the banking industry because of all the banks that have problems and it will continue until confidence is restored.”

With banks like Washington Mutual being bought out, Habig said he sees a positive in all of the turmoil.

“There might be a little less competition, not a significant amount, but the main thing is it will benefit those left standing because people will have confidence in those (banks) left,” he said. “I hate that it’s happening, but there is a positive with customer confidence return.”

— Andrea Hirsch, Wade Coggeshall, and Charlee Beasor contributed to this article.