After a two-week financial roller-coaster ride, many people from Wall Street to Main Street are feeling a little queasy and unsure about what’s next.
Friday brought more extraordinary actions from the federal government, as it prepared to take over billions and billions in toxic mortgage assets and placed a $50 billion safety net under money-market funds.
Those shoring-up measures fueled a rise in the Dow Jones industrials of about 370 points, giving them a two-day gain of about 780. The week also included a combined drop of more than 950 points on Monday and Wednesday.
Amid some criticism for bailing out Wall Street, Everett’s Greg Rielly said the government really had no other plausible choice.
“These are very concerning times. I think we crossed over the line to where they had to take action,” said Rielly, a mortgage planner for Mortgage Advisory Group. “Our government’s stepping in and taking some actions they should have taken awhile back. They’ve gone from being irresponsible to responsible again.”
He said the actions this week should help the mortgage industry, which has been in crisis for the better part of two years nationally.
As the future of Seattle-based Washington Mutual hovered in the air Friday, Snohomish County’s banks enjoyed some good news.
The Securities and Exchange Commission’s emergency ban on short-selling of financial stocks helped shares of Cascade Financial Corp. and Lynnwood’s City Bank. Both rose by more than 30 percent. On Thursday, Everett’s Frontier Financial saw its shares rise 50 percent.
Carol Nelson, Cascade’s president and chief executive, said all the local bank stocks had been pushed down in recent months by short-sellers, so the new crackdown helped them to suddenly rebound. Nelson added that the recent string of events was unlike anything else she’s seen in 30 years of banking.
“The factors that are colliding in the marketplace are creating an interesting situation,” she said. She had no comment on how the government’s bailout plans might strengthen the banking industry, as details weren’t available Friday.
“I think that we really need to wait and see the specifics,” she said.
Cathy Reines, president of Snohomish-based First Heritage Bank, echoed that thought. Meanwhile, her bank’s been blessedly immune from many of the problems plaguing bigger competitors.
“We didn’t hold Fannie Mae stock, we didn’t hold Freddie Mac stock, we didn’t hold Lehman Brothers,” Reines said.
Still, she and other managers at First Heritage have fielded customers’ questions about how ripples from Wall Street might affect the bank. They’ve also been opening new accounts at a brisk clip.
“Any time there’s this type of roller-coaster ride in any industry, there’s also opportunity,” Reines said, explaining that nervous customers from bigger banks are fueling the new deposits at First Heritage.
Looking for an upside in the mortgage industry, Rielly said it’s not a bad time to buy a house — if you can qualify. It’s not as hard as media headlines might lead one to think, he said.
“If you’ve got a 640 or 650 credit score, you’re going to do fine, as long as you’ve managed your debt,” he said.
Howard Bono, owner of Old West Mortgage in Everett, said he’s qualifying a lot fewer people than he could a few years ago. But for the lucky few who meet the right requirements, there still are zero percent down-payment mortgages and other programs available. He thinks housing prices in the region may not be headed down much more, either.
“We are nearly at the bottom. At any time in the next few weeks or months, we are going to be able to say we’ve hit that and are going back up,” he said.
While financial experts decipher what the wild ride on Wall Street and the resulting bailout mean for their industries, the view from Main Street is at least as uncertain right now. With unemployment going up and retail sales flat at best, it may be a relatively quiet shopping season between now and the year’s end.
Judy Matheson of JMatheson Gifts questioned whether the bailout would trickle down to small businesses like hers on Colby Avenue in downtown Everett.
“I don’t think it’s going to help one bit,” she said. “I even feel that the tax rebate (stimulus checks) didn’t help at all.”
Matheson said her business has been doing well and has even improved recently. She credited that to customers who care about buying local, who don’t want to drive long distances because of high gas prices and who like an emphasis on service.
Just about everyone on Friday agreed that whether there’s worse to come or whether the nation’s financial markets have turned the corner, it’s not likely to be hopeless. Bono said the government’s actions may speed up the amount of time it will take until a recovery starts.
“It’s a serious situation,” he said, “but whatever happens, we’ll survive.”
Herald editor Mike Benbow and The Associated Press contributed to this story.
Reporter Eric Fetters: 425-339-3453 or fetters@heraldnet.com.
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