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Plummeting stock market impacting retirement funds

Posted September 15, 2008
Updated September 16, 2008

— The upheaval in the American financial system sent shock waves through the stock market Monday, producing Wall Street's worst day in seven years.

The Dow Jones Industrial Average lost more than 500 points, more than 4 percent, the most points the market has lost since it reopened after the Sept. 11, 2001, terrorist attacks. About $700 billion in value evaporated from retirement plans, government pension funds and other investment portfolios.

“This has the elements of a full-blown panic,” financial consultant Jeffrey Miller, with Raleigh-based Armor Investment Advisors, said.

Miller said those people who were hoping to kick back in retirement soon are feeling it the worst.

"They don't wanna be 60 years old, looking to retire and not have any money there,” he said.

N.C. State economist Mike Walden said soon-to-be retirees need to be thinking about their options.

You "may want to think about pulling out. We do not know how low the low is going to be,” Walden said.

Miller said that for people with money to spare, it is a smart buyer's market. Stock shares of good companies are priced cheap.

“Fear and turmoil and all of this creates opportunity," he added.

Charlotte-based Bank of America took advantage of Merrill Lynch's plunging stock. Merrill's shotgun sale to BofA will create the nation's largest financial services company.

The deal keeps Merrill from a Bear Stearns-style fire sale or a complete meltdown like Lehman Brothers while removing a major player that some expected to be the next shoe to drop in the credit crisis. At the same time, it will enable BofA to expand the financial services it offers to its already huge customer base.

“We think this is a strategic opportunity of a lifetime,” Bank of America CEO Ken Lewis said.

"And that is very significant because financial services to North Carolina in the 21st century is what tobacco was to the state in the 20th century,” Walden said.

Miller said that is why he suggests his clients diversify their portfolios. Walden said he thinks there will be substantial improvement in the stock market by next summer.

Lehman Brothers, an investment bank that predates the Civil War and weathered the Great Depression, filed the largest bankruptcy in American history.

It was by far the most stomach-churning single day since this financial crisis began to bubble up from billions of dollars in rotten mortgage loans that have crippled the balance sheets of one bank after another and landed mortgage giants Fannie Mae and Freddie Mac under the control of the federal government.

In Washington, Treasury Secretary Henry Paulson, who refused to toss a financial lifeline to Lehman, was unapologetic as the Bush administration signaled strongly that Wall Street shouldn't expect more rescues from Washington.

The American people should remain confident in the "soundness and resilience in the American financial system," Paulson told reporters at the White House.


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  • daMoFo Sep 16, 2008

    "Ah, but is about politics, government spending, frivolous and irresponsible decisions; the whole enchilada! My husband and I lost all of our retirement money in the stock market when the government took over Fannie Mae and Freddie Mac."

    Umm, exactly how did the government taking over Freddie and Fannie cause you to lose all your retirement money?

  • daMoFo Sep 16, 2008

    If the government allows me to put some of my social security money in the stock market I'm all for it. We should have that CHOICE.

    Also, the seeds of the mortgage meltdown were sown in the 1990's when the Fannie Mae and Freddie Mac, under pressure from the Clinton administration, began to guarantee mortgages to high risk borrowers. The NAACP, Jesse Jackson etc began complaining that too many blacks were being denied mortgages due to racism, naturally. In reality, banks were saying no because their credit profiles were bad. Of course facts did not matter and so the Clinton administration pressured Fannie and Freddie to ear mark several billion dollars each year to buy loans of high risk borrowers. And now those same high risk borrowers are defaulting(suprise).

  • delilahk2000 Sep 16, 2008

    I hope the over paid CEO'S are happy now, that they have screw the taxpayers and left them in the dirt and walk away still with their multimillion dollar checks THAT THEY DID NOT EARN as we now see. I have always said that the greedy corporate america will run this country into the ground, now we see it. If the gov. had left and not borrowed in the past from social security to pay other debts. and new they were not going to pay that money back we would not have to work longer. I think all these ceo's should have to turn all their money over to the tax payers and let them suffer some for a change. ENOUGH IS ENOUGH. They are no better than ENRON and shold go to jail like they did. Your Greed has caused all this heartache, I hope they are happy.

  • 68_polara Sep 16, 2008

    As of 3:15 this afternoon it's back up to 11,070

  • chfdcpt Sep 16, 2008

    they got a $15M parachute for screwing taxpayers.

    That is the really sad part. They will get away with millions in compensation, while the folks under them that busted their tails to make the companies run now have no job, no severance, no insurance...

  • NeverSurrender Sep 16, 2008

    "It's not about government. The government had no control over banks and mortgages making risky investments."


    It did not necessarily control HOW Fannie/Freddie and the banks were making those dodgy loans to people whose ability to repay was an utter fantasy but it certainly had leaned on Fannie/Freddie to make those loans and put people who had no business owning a home into houses.

    Fannie/Freddie were fundamentally flawed from the start. Government backed but answerable to shareholders is just asking for trouble and abuse.

    Then the government changed the rules in the late 1990s and essentially ordered Fannie/Freddie to guarantee loans they had no business guaranteeing.

    The greed of the banks in securitising these dodgy loans as well as the other risky financial vehicles they concocted to make even more of a pig's breakfast of the whole mess has certainly come home to roost.

    But that's OK for the CEOs of Fannie/Freddie...they got a $15M parachute for screwing taxpayers.

  • 68_polara Sep 16, 2008

    What I don't understand is how someone can have a home foreclosed upon than have a brother purchase a house. He lives there for 6 months or so than goes back to living in his primary residence. The person who had the foreclosure than moves in to the home. A year later this person purchases a brand new SUV when gas prices are at 4/gallon. No kidding...

  • thatsenough Sep 16, 2008

    I'm with Armando and superman...this is about folks living beyond their means!!! It's call "living large".

    I was taught never to allow my mortage to exceed 1/4(one fourth) of my take home income. I'm glad I listened,..now I can afford to fill my tank up, be satisfied and die on the job!

    I am one Obama voter who says let the market correct itself!

  • 68_polara Sep 16, 2008

    The market has been moving up so far today, funny how they only report the bad news.

  • Armando de Cabana Boy Sep 16, 2008

    NCMacMan- Your comment is dead on it! Folks that are pointing at Dems or Repubs are wrong. We have become a nation of consumers. Folks buying $400K and $500K houses that should have probably spent $200K. Some people just will not live within their means. Then you got the greedy folks pushing loans that should have never been made. Let them all fail. Market correction, if you will.