Sep 15, 2008 10:24 pm US/Central
Economic News Not All Bad For Midwest
(WCCO)
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A trader works the floor of the New York Stock Exchange on Sept. 15, 2008.
Spencer Platt/Getty Images
In the aftermath of Lehman Brothers filing for bankruptcy and the sale of Merrill Lynch to the Bank of America, stocks plunged on Monday.
But the chair of the University of St. Thomas finance department said the crisis will have a relatively minimal effect on the average Minnesotan.
Professor David Vang said the cause of the crisis is the subprime mortgage mess. Wall Street firms like Lehman bought billions of dollars of subprime loans from local banks.
"The typical Minnesotan probably won't notice because what's basically happened is a lot of these loans were made a long time ago, they aren't being held by banks here anymore and now Wall Street is stuck with some bad judgments they have to deal with," he said.
Vang predicts the stock market will remain flat for months and will eventually rebound. He and other experts say the economic rebound depends on when the housing market begins to turnaround. Vang said that is likely to happen in Minnesota before it does in other parts of the country.
"The fall in the value of homes really seems to be settling out at least here in the Midwest we were not as overexposed to the subprime crisis as some areas like Nevada and California," he said.
He also said it will continue to be tough to get home and consumer loans.
As for what this means for your money -- anyone with any money in a 401K or in stocks took a hit on Monday. But experts stress stocks that suffered the most are those of the investment firms in crisis.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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