Crisis Has Local Nerves on Edge
Like the rest of the country, there is a lot of hand-wringing going on in Moore County as residents wait for the economy to come out of a tailspin.
The financial situation worsened considerably Monday in the wake the U.S. House's rejection of a $700 billion bailout package designed to stabilize the volatile economy. The Dow Jones Industrial Average plummeted more than 700 points Monday, the worst sell-off in American history.
"I've never seen people this concerned before, and it's justifiable," William Clement, a local financial adviser, said. "Nobody's ever seen anything quite like this."
Clement said he is becoming increasingly concerned about people on the verge of retirement. However, he is advising his younger clients to "stay the course" in equities. He said the economy has always come back, and this might be a good time for those younger clients to buy.
Clement believes that while things will continue to be rough in the short term, it could end up being a positive in the long run because it will force the government to get back to fundamentals that have been lost over the past couple of decades.
Congressional leaders and the White House reached a deal on the bailout package after several days of tedious negotiations in Washington. But the political climate degenerated into finger-pointing between Republicans and Democrats as the House rejected the plan.
Shortly before the vote, Democratic House Speaker Nancy Pelosi blasted the "failed Bush economic policies" and proclaimed that "the party is over" -- referring to Republican free-market philosophy, which she said caused "chaos." House Republicans blamed Pelosi's speech for the failure of the bill.
Clement believes Pelosi made a tactical error with her speech.
"This thing has gotten too politicized," he said.
Closer to home -- as the debate over the bailout plan raged in the nation's capital -- Wachovia, the nation's fourth-largest bank, announced Monday it was selling its retail banking operations to Citi for $2.2 billion.
Charlotte-based Wachovia has two branches in Moore County and maintains a large presence in the Southeast.
"During recent weeks, the financial landscape has changed significantly and presented us with unprecedented challenges," said Robert K. Steel, CEO and president of Wachovia, in a new release. "Today's announcement is the best alternative for the company, enabling a resolution on the Golden West Portfolio."
Wachovia purchased Golden West several years ago. The company specializes in adustable rate mortgages. As a result of the crisis in the subprime lending industry, the company has amassed significant losses.
The Pilot contacted Wacho-via's corporate headquarters in Charlotte. Representatives there said they had no comment beyond the news release.
The deal, assisted by the Federal Deposit Insurance Corp., will create the largest U.S. bank by total deposits. While Citi will acquire "the bulk" of Wachovia's assets and liabilities, Wachovia will remain a public company and retain its asset management, retail brokerage, and certain select parts of its wealth management businesses, including the Evergreen and Wachovia Securities franchises.
It is still too early to tell how local Wachovia branches will be affected by the deal, but FDIC Chairman Sheila C. Bair reassured Wachovia customers in a press release.
"For Wachovia customers, today's action will ensure seamless continuity of service from their bank and full protection for all of their deposits," Bair said. "There will be no interruption in services and bank customers should expect business as usual."
Clement said bank consolidation could hurt individual consumers but could strengthen community banks in the long run.
"It's not good for the small consumer," Clement said. "We're fortunate to have so many community banks in the area."
The Wachovia buyout is the latest chapter in a wave of uncertainty to hit the financial sector. Just a couple of weeks ago, Merrill Lynch, one the country's most respected financial planning firms, was acquired by Bank of America. AIG, one of the world's largest insurers, was bailed out by the federal government.
Another investment firm, Lehman Brothers, filed for Chapter 11 bankruptcy protection. In August, the federal government assumed control of Freddie Mac and Fannie Mae, the two largest mortgage backers, as a result of the subprime mortgage crisis.
Contact John Krahnert at 693-2473 or by e-mail at email@example.com.
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