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Business Experts Discuss Effects of Market Swings

Large financial institutions have shouldered much of the impact of the rattled stock market and housing numbers, but there are new concerns about the effects on the economy. Four business writers from around the country explain how the instability is hitting home.

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  • JEFFREY BROWN:

    "Markets are rattled," that's become a daily mantra of the news coverage again today, and most of that bad news has focused on large financial institutions: hedge funds, mortgage loan companies, and others. The growing concern now is how much all this is hitting the general economy.

    We take a partial snapshot around the country with four business writers: Kim Blanton is a reporter at the Boston Globe; Loren Steffy is a columnist at the Houston Chronicle; Daniel Howes is a columnist at the Detroit News; Kathy Kristof is a reporter and syndicated personal finance columnist at the Los Angeles Times.

    Well, Kim Blanton, I'll start with you. To what extent are the woes of Wall Street hitting Main Street in your region? Is it still mostly in the housing market?

  • KIM BLANTON, The Boston Globe:

    Yes, it is mostly in the housing market, but I think there's really a concern it's going to spread into the business sector. You know, I think today, with all the problems of Countrywide, the biggest learned in the country, people are really sitting up and saying, "Wow, we have some serious problems here in the credit markets." And I think there's a concern that it's going to hit business, not just the housing sector.

  • JEFFREY BROWN:

    Staying with the housing, staying with you for a moment, most of the attention, of course, has been on the riskiest loans, the so-called subprime mortgages. Has it spilled over into the larger housing market?

  • KIM BLANTON:

    Oh, absolutely. Jumbo mortgages that are over the size where the federal agencies, Fannie Mae and Freddie Mac, will buy the mortgages are now very hard to get or they're very expensive. I heard some banks in Massachusetts are charging 9 percent for those loans.

    And, remember, somebody buying a big house is probably somebody with a good amount of income, but the investors in mortgages who are a major source of funding for the mortgage market are saying, "I don't want anything if it isn't somehow government-backed or if it's even a little bit risky."

    So mortgage loan rates or interest rates are going up quite a bit, and it's just scaring off buyers. Now buyers are saying, "Hey, I'm going to wait and see if prices go down more before I even buy." So it's really rippling through just the whole housing market and the whole lending industry, not just the subprime.

  • JEFFREY BROWN:

    Loren Steffy, what do you see in Houston? How much concern are you hearing about what's going on in Wall Street and translating into Main Street?

  • LOREN STEFFY, The Houston Chronicle:

    Well, there's a growing amount of concern here in Houston, but we have some benefit over what Kim's talking about in Boston, because housing prices in Houston are so much lower than what you have on either coast. The average home price in Houston is about $155,000.

    So even though we've had a lot of subprime activity, we had a lot of concern about adjustable rate mortgages, we didn't have the huge run-up in prices that you've had in some other parts of the country. And so the slowdown hasn't been as severe here as it's been in other places.

  • JEFFREY BROWN:

    And do you see it growing into other sectors beyond the housing sector at this point?

  • LOREN STEFFY:

    Well, that's the big concern, obviously. Housing is a big industry. Houston's had a lot of growth in the last few years, and there's a concern about the ripple effect. How will this affect, you know, home improvement companies and things like that?

    There's also a lot of concern about the mortgage industry itself. There's been several big lenders that have had either operations here that were based here that have either stopped making loans or filed bankruptcy in recent weeks, and that's had an impact on employment. So there's kind of a growing concern that this could spread out beyond simply the housing market and have a broader impact.