WHEELING-After crisis struck on Wall Street Monday, Americans were left scratching their heads with unanswered questions. In Wheeling, financial advisers are weighing in on how the local economy could be affected.
Pete Holloway, financial adviser/consultant for Hazlett, Burt & Watson Inc., said those who are insured by American International Group Inc., or AIG, should talk to their insurance agent.
"If you are not insured by AIG, it still doesn't hurt to talk to your insurance agent," he said.
Holloway said people should understand that insurance companies are regulated. Each insurance company is regulated by each of the 50 states.
But whether those who have car insurance through AIG will still be covered in a few months, Holloway said that remains to be seen.
"A number of eyeballs are keeping track on each of the insurance companies," Holloway said. "I really feel an awful lot of this will be played out in Wall Street."
While Holloway said there are insurance protections available, if claimholders are nervous, he again said it's a good time to talk to their adviser and review their personal information.
"This is a good time for people to review their portfolios and make sure there are no issues lurking in it," he said. "There are some weaker financial companies mutual funds that may have holdings in these companies and I want to state that people should understand that any assets in the bank are insured up to $100,000 by the Federal Deposit Insurance Corporation or FDIC. If people have more than $100,000 across several accounts checking, IRA, CD it makes sense to perhaps spread that money over several banks. That's not to say there is any problem with any bank, it's just rational to spread that out."
At the same time, Holloway said local investors are covered by the Securities Investor Protection Corporation, or SIPC, for up to $500,000.
"Not against market loss, but should the brokerage go under or something happen where you have an unscrupulous broker there are none in this town but if you ran into a bad apple somewhere out of town, that loss would be covered," Holloway said.
Brian Sommers, CFA, chief investment officer with McKinley Investment Group Inc., said with Monday's Dow Jones Industrial Average drop, local investors need to worry about what happens to AIG today.
"It's true that their stock has sold off," he said. "But today is going to be a very key day to see if they can get the liquidity to keep them in business. If they don't, and they do file for bankruptcy, a lot of pain will be felt in a lot of different areas. If they don't file for bankruptcy that will help the situation out greatly."
Sommers said he believes that the fundamentals in the economy are fine, but what is causing problems is the credit crunch as it is causing firms to not want to lend money to financial firms such as AIG.
"Even if business is fine, if they don't have liquidity, they can't stay in business," Sommers said.
In the event AIG claims bankruptcy, Sommers said those who have their car insurance through the agency may have trouble with their claims.
"But I don't think that will happen," he said. "I don't think the government will let that happen. Today will tell."
Overall, as for how the local economy will be hit, Sommers said AIG should have no impact in any scenario except for the worst case scenario where they file for bankruptcy. He also stressed he does not think the government will let the situation get to that point.
"The bottom line is wait and see what happens over the next 24 hours," Sommers said. " If the government ever thought any firm was too large to fail, then AIG is too large to fail, but because of political reasons the government might need to step in."