Q&A: What now with the $700B financial bailout?
To what extent will this benefit banks, or will more fail?
Many banks, especially local ones, don't have mortgage-backed securities in their portfolios and as a result won't directly benefit from the bailout by being able to get them off their books. But there are indirect benefits to banks. The bailout should get the broader economy moving forward. In addition, increasing FDIC insurance to $250,000 should increase the comfort level of bank customers.
- Howard Headlee, president of Utah Bankers Association
Will this stabilize financial markets? What action, if any, should I take?
When you have this much volatility in the market, the smart thing to do is stand aside and not make any big moves. The stock markets can stay irrational a lot longer than most investors can stay solvent. If you want to add to your portfolio, do it bit by bit and not all at once.
- Nate White, chief investment officer at Paragon Wealth Management, Provo
Will tight lending ease and stabilize falling housing prices and the housing market? Will it ease consumer and commercial credit?
If the bailout succeeds, within weeks consumers likely will find it easier to get mortgages and other consumer loans. But lending standards - especially in relation to home loans - aren't likely to loosen to levels that preceded the financial crisis. Lenders will continue to place added scrutiny on borrowers' ability to repay, closely looking at credit scores and incomes. Down payments for all types of loans are increasingly important now and likely will remain so.
- Jeff Thredgold, an economist for Zions Bank, and mortgage professionals
What barometer should I watch to gauge economic health?
The overnight LIBOR, or London Interbank Offered Rate, is the interest rate that banks are willing to charge each other for overnight loans. It hit an all-time high Tuesday, a reflection of the fear that banks have in dealing with each other. As the credit crisis eases, you would expect that rate to go down. To view the LIBOR Overnight rate visit bloomberg.com and type into the quote box: us00o/n:ind
- Nate White, chief investment officer at Paragon Wealth Management, Provo.
The Dow Jones Industrial Average and the S&P 500. The Dow is an indication of the relative health of the economy. News on the availability of mortgages and mortgage rates also provides indications about the state of credit market.
- Jeff Thredgold, an economist for Zions Bank
In the long run, it should be effective. In the short term, though, it isn't like just turning a spigot and everything is going to be fine. It will take a while to work. It's starting to look as if we may be slipping into a recession.
- David Young, president of Paragon Wealth Management, Provo