The Dow Jones Industrial Average fell more than 500 points on Monday: the largest drop since September 11th, 2001.
It happened after news emerged that Lehman Brothers, a Wall Street institution for more than a century, is declaring bankruptcy, that Merrill Lynch is being purchased by Bank of America, and that insurance giant AIG is borrowing from itself, to stay afloat.
All of this comes just a week after the federal government bailed out mortgage giants Freddie Mac and Fannie Mae.
So what does this all mean for your money As it turns out, most Mainers have little to worry about.
":Some of the things that we’ve seen going on nationally, have not hit Maine because Mainers have good common sense.": Prof. John Mahan of the college of business, public policy and health at the University of Maine. He says for the most part, Mainers make conservative choices when it comes to investments, and now, those safe bets are paying off. ":They said, I’m not going to do that because I know I can’t afford that, even though it looks attractive…And that’s what has gotten a lot of people in this country in trouble. Overspending.":
And it’s not just Maine people making good choices, its also Maine’s banks, according to TV5 financial advisor, Marion Syverson.
":We don’t have bankers who are lending people money like that. ‘Oh, you don’t have a job, you have no prospects, you want a mortgage for $250,000. Let’s write that check, let’s write that baby.’ We can’t get loans like that, we have more conservative institutions, and they’re all still standing.":
Nonetheless, we, as the taxpayers, will have to pay for other people’s mistakes.
Those about to draw from their pension plans will also feel the effects, as well as folks looking to either buy or sell their homes. And then, there’s the panic button.
":There will be some impact for everybody because when things go up and down, there’s a reaction.": Syverson said on Monday. ":Because people are freaking out, and so they pull their money out of General Mills. What’s that got to do with anything OK, they’re just selling cereal. That’s when you’re not letting your brain take over.":
When it comes to stocks, both Syverson and Mahan say don’t let emotions dictate your decisions. Instead, they advise to hold onto your investments if you can, and ride out the storm.
":There’s always ups and downs. If you look at a chart of what the stock market has done since 1925…We had two World Wars, the savings and loan debacle happened in the 80’s, lots of stuff happened where 3,000 banks failed. It keeps going up.":
Merrill lynch is the provider for Maine’s Next Gen college savings plan.
Marion Syverson says it looks like the company will be okay, and most investors have no reason to pull their money out right now.