From Wall Street to Main Street

The credit crisis' impact on you

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The wave of bank failures and the wrangling in Congress over a $700 billion rescue plan for banks has many investors and small businesses reeling at the turmoil’s possible impact. The events hit close to home for many, yesterday, as JP Morgan Chase purchased parts of Washington Mutual after a government seizure. With the effects now rippling into Main Street, individual investors and small business owners can take steps to weather the crisis and possibly gain from it too.

In an unprecedented rush Washington Mutual customers withdrew $16.7 billion in a span of 10 days bringing the banking giant to its knees, signaling possible fear among consumers.

“I don’t think a panic is justified,” says John Isakson, CEO of Williams Asset Management. Since certain deposits within banking institutions are insured up to $100,000 by the federal government, banking customers do have some protection. “I don’t think the economic environment today is going to cause the government to collapse and not pay that,” he added. The JP Morgan and Washington Mutual deal was done to move deposits to a more stable institution.

While the stock market remains in flux, individuals can take measures to safeguard their personal savings and investments, but it may not all be gloom and doom. “If your portfolio is invested in a broad range of mutual funds it shouldn’t get wiped out,” Isakson says. Others note that now is a good time to evaluate portfolio options. “It’s absolutely essential in times of market volatility to re-examine your portfolio and your risk tolerance,” says Jim Tancredi, co-chair of the bankruptcy and creditors rights group at Day Pitney LLC. He also says in the face of uncertainty, many investors have moved their money to less risky government securities and precious metals.

Savvy investors however can take advantage of today’s dismal markets which can mean prosperity once the crisis is resolved. “Astute investors will look for investments where the company has the earmarks of good management and good business fundamentals,” Trancredi says. “While there will be a lot of complexity and uncertainty associated with investment right now, to the extent that investors can analyze the fundamentals and prospects of some key industries, there will be great opportunities to get returns when those companies emerge from this uncertainty.”

While Congress ramps up negotiations on a bailout plan seeking to infuse liquidity and capital into a credit tight banking industry some small businesses are feeling the backlash. The Small Business Administration reported that more than 65% of U.S. banks have tightened their lending standards for loans to small businesses. The SBA’s 7(a) program had a 30% decline in loans issued so far this year. Their 504 loan program issued 16% less loans. “Because of the uncertainty banks and large financial institutions want to keep as much cash on the sidelines,” Isakson says, putting a greater choke hold on loans. “Consequently you will have a much higher cost of

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