Is Our Money Safe?

When Bill Crews, the chairman of Wauchula State Bank, and Tom Trevino, a broker with Merrill Lynch's brokerage in Sebring, spoke to the Kiwanis in Hardee County on Tuesday, they faced a deluge of questions.

"We didn't have enough time to discuss it all," said Crews. "They were concerned about the whole system."

In case you've missed it, in March, investment bank Bear Stearns was bought out by Morgan Stanley. The federal government put up $30 billion.

Nine days ago, the feds committed to investing $200 billion in mortgage giants Fannie Mae and Freddie Mac.

On Tuesday, the Treasury agreed to an $85 billion emergency loan to insurance king American International Group Inc. Stock brokerage Merrill Lynch will be merged with Bank of America. Lehman Brothers filed bankruptcy over the weekend.

People are worrying about the safety of their money.

What they should do instead, said Paul von Merveldt, financial advisor at the Lake Placid brokerage of Edward Jones, is ask their broker what's in their portfolio. Most mutual funds have from 75 to 275 stocks and bonds.

"They should know if they own inappropriate amounts," von Merveldt said.

For teachers and firefighters, the Florida retirement system held $303 million, or less than 1 percent of the total. Florida CFO Alex Sink said the state treasury held $139 million, or 0.6 percent of the total investments.

"That's why we diversify," von Merveldt said.

For Crews, here's the bottom line: his 80-year-old, family owned bank remains strong. It wasn't involved in the sub-prime mortgage market, and neither were the rest of the local banks, said Crews, who watches the competition.

Since the 1982 Penn Square fiasco, when banks loaned billions to oil speculators, U.S. banks are highly regulated, Crews said. They're not allowed to make risky loans, so only nine banks have failed this year.

Lehman Brothers, Bear Stearns, and other Wall Street investment and commercial banks are less regulated, Crews said.

When local banks can't loan the money on deposit, they buy securities which include federally backed mortgages. So on Sept. 8, when the federal government pledged $200 million to stop mortgage defaults and took over Freddie Mac and Fannie Mae, Crews said, "They helped every bank in the U.S. who owns those securities."

In the past nine days, mortgage rates have fallen from 6.5 to 6 percent. But money may be harder to borrow, Crews said. Banks will look more closely than ever at the borrower's ability to repay.

"Land prices across the board are still falling," Crews said, so banks also may ask for more money down.

No more of what the industry came to call "liar's loans," Crews said. Sub-prime loans were so easy to get, big banks didn't check out the borrower's income claims.

WHAT DO WALL STREET'S WOES MEAN TO YOU?

Are local banks and brokerages in trouble?

"We don't buy commercial real estate, we don't invest in sub-prime. We stay away from the dangerous stuff."

Paul von Merveldt, financial advisor at the Lake Placid brokerage of Edward Jones

Bank of America's buyout of Merrill Lynch doesn't conclude until 2009. The Sebring office will remain open, at least until then.

Ken Lewis, CEO, Bank of America Corporation

"We're as strong as an ox."

J.W. Bill Crews Jr., chairman, Wauchula State Bank

Will mortgage loans be harder to get?

"Across the board, yes, no question. But interest rates are coming down."

J.W. Bill Crews Jr., chairman, Wauchula State Bank

Is your retirement money safe?

If a bank fails, the FDIC insures deposits up to $100,000 per customer. If a brokerage fails, the Securities Investor Protection Corporation insures stock market accounts up to $500,000 per customer ($100,000 cash). A Lloyd's of London policy insures up to $600 million in additional protection for each brokerage customer. There is no protection against market losses.

Internet sources