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July 19, 2024

Writer and social critic Alice Dunbar Nelson was born in 1875 and helped shaped the Harlem Renaissance.

Global Financial Crisis Deepens

POSTED: September 18, 2008, 12:00 am

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The move Monday by the Federal Reserve Board Tuesday to bail out insurance giant American International Group (AIG) did little to calm investors nerves as was evidenced by the Dow Jones industrial average plunging 449 points at the close of trading on Wednesday. Stocks fell by nearly 5 percent on the New York Stock Exchange. The market has lost 800 points since Monday. Across the board Asian markets were down in trading on Thursday.

The crisis continues to entrap major businesses. Two Wall Street firms – Goldman Sachs and Morgan Stanley – saw its shares fall. President Bush canceled two trips Alabama and Florida to remain in Washington DC to contend with the deteriorating financial situation. Meanwhile, there were new indications that other institutions are at risk as the nation’s largest thrift, Washington Mutual, is looking for a buyer and the Reserve Primary Fund, a large mutual fund, announced that its customers would lose money.

The financial crisis is beginning to show signs of spreading beyond financial institutions. The city of Chicago and Lincoln Center for the Performing Arts in New York City both announced they would delay debt offerings to avoid paying higher interest rates. Two Maryland counties – Prince George’s and Montgomery - announced the possibility of furloughs as local governments are beginning to feel the impact of the downturn as budget deficits grow. In Prince George’s County has asked its workers to take ten furlough days before June. And investors began to check their portfolios to determine where best to put their money as fears grow that what may have once been considered safe investments could be in jeopardy.

On Capitol Hill there were grumblings in Congress as some Members expressed concern that the move by the Federal Reserve to bail out AIG had left them on the sidelines. One sign that the federal government was struggling with the crisis was the announcement by the Securities and Exchange Commission (SEC) issued new rules to try to control short selling, an aggressive investment technique of betting against falling share prices, that has come under criticism by some critics who allege it has fueled some of the volatility in the market. The SEC’s action is further proof that the crisis is beyond the ability of regulators to fully comprehend and that, to some degree, the federal government is currently at a loss in determining how to stop the seeming freefall.

For the average citizen there are real concerns that personal savings and retirement security may be at risk. There are a couple of basic steps people can take to make certain that their bank accounts and investment portfolios are sound. Individuals can check the Federal Deposit Insurance Corporation (FDIC) to make certain their deposits are insured. Likewise, for credit union accounts, the National Credit Union Share Insurance Fund is the source for information on those accounts. Investors should check with the Securities Investors Protection Corporation (SIPC) to determine if investments are protected. The SPIC maintains a special reserve fund to help investors with accounts at failed brokerage firms. SIPC coverage is limited to $500,000 per investor, including up to $100,000 in cash.

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