Will financial bailout help Walworth County?
As Congress spent last week debating the proposed $700 billion bailout for troubled financial institutions, the effect on the average American remained unclear.
In testimony before a congressional committee Tuesday, Treasury Secretary Henry Paulson argued the plan was the best way to help average Americans.
But what are we getting for $700 billion?
Those in real estate and finance here at home aren't expecting any direct and dramatic help.
Their main hope is that passage of a bailout would mark the bottom of the economic downturn and give consumers some confidence in deciding how to spend their money.
A bailout should help consumer confidence and mean the economy has reached a turning point, according to Al Herbst, vice president of mortgage and real estate lending at Blackhawk Community Credit Union.
That's because even those with good credit have been squeezed in the tight credit market. Herbst says that while lending institutions are increasingly cautious with the amount of risk they're willing to take on, they're also leaning on their most credit-worthy customers to help cover that risk.
Herbst says Blackhawk Community Credit Union works hard to find ways to help borrowers get loans, even in the current market. "We're looking at each loan application individually," he said.
However, the job of helping individual borrowers in financial stress has fallen to individual lending institutions.
Herbst said the credit union also is trying to be proactive with borrowers in trouble. "We're seeing more delinquency," he said. "But we've been public about wanting to help."
The increased number of bank-owned properties on the Multiple Listing Service is just one measure of the growing rate of foreclosures, according to Michael VanderBunt, association executive with Lakes Area Realtors.
"There's no question that we're seeing the impacts of this," he said.
VanderBunt agrees that buyer uncertainty has hurt the real estate market.
Potential buyers are wary, and they have a wait-and-see attitude.
"A lot of buyers are fence riders right now," VanderBunt said. "People think if they wait, they might get a better deal."
VanderBunt said the bailout would create a bottom line, which hopefully would draw buyers into the real estate market.
There also are those who have remained relatively unaffected by the trouble in the mortgage market.
Sales to first-time home buyers and buyers looking to purchase lakefront property remain strong, VanderBunt said.
First-timers are taking advantage of price drops, and lakefront purchasers have apparently weathered the economic downturn.
Although the focus of the bailout plan is to buy bad mortgage assets from lenders, the hope is that the move also will boost the stock market.
That's of concern to those investors who have a particular need for their money right now.
"If you have college savings and your child is going to school in the next year, your money should not have been in stocks," said Robert Anderson, principal and portfolio manager with McSherry Anderson in Lake Geneva.
"Now is a reminder to reevaluate their risk tolerance," Anderson said. "The thing is, can you live with (the stock market) going down 20 percent?"
Those close to retirement have been watching the market carefully, however the impact depends on where their money is invested.
Although recent drops in the S&P 500 have been among the steepest in history, it's only a handful of stocks that brought it down, Anderson said.
For those with years in the work force ahead of them, the market has produced some bargains. "For younger people, it's a great opportunity to buy more shares at low prices, especially if you're looking at the long term," Anderson said.
There's no doubt that what investors need is confidence that their investment will pay off.
But the local economy also has been hurt as more people fall into financial trouble.
Large financial institutions that invested heavily in what turned out to be bad mortgage assets certainly will benefit from a $700 billion bailout plan.
Individuals who have suffered should be part of the plan too.
Dan Plutchak is an associate editor for CSI_Media LLC, publisher of Walworth County Sunday. Contact him at firstname.lastname@example.org.