Wall Street to Broad Street

wall-streetWhen Wall Street institutions falter, Richmond feels the tremors. But the details of how all this will play out locally are anyone’s guess.

Pat Fishe, a professor of finance at the University of Richmond’s Robins School of Business, said that the day’s events have several local ramifications. National banking activity could slow, and with our substantial banking sector, that could mean slowed growth locally, at least in hiring.

Business loans could become harder to get as the collateralization – where firms like Lehman Brothers sliced and diced commercial and residential loans and sold them to investors– slows.

If Merrill Lynch is indeed bought by Bank of America, the local offices of the stock brokerage will hang a new shingle. Or maybe not, but they’ll have a new corporate overlord. Whenever that happens, some brokers decide not to make the switch, and sometimes customers don’t want their money handled by a new firm.

“Merrill Lynch will do everything to keep their best performers … They also don’t have a lot of overlap on the same type of products,” Fishe said.

“If I had to speculate what they’d do, I’d say the Merrill Lynch side of the business is better off in retail sales than Bank of America. What they’ll do, access Bank of America customers list, call those guys up and say, ‘We’ve got some more interesting things the bank couldn’t sell you till now.’”

But the bigger worry locally, according to Michael Jones, a chief investment officer and co-founder at Riverfront Investment Group, is local money tied up in AIG products. Read more about that here.

“The risk is that you have State 503b plan with AIG or do you have a variable annuity from AIG? What is your real financial exposure should AIG not pull through the liquidity crisis right now? The retail investor has some things to find out today.”

The huge sell off on Wall Street also hammered local stocks.

Media General fell almost 20% on Monday to close at $8.54. All media stocks suffered in a big way on Monday, but this is the first time Media General has fallen below $10 a share in decades. The stock has lost more than 75% of its value in the last two years.

wall-streetWhen Wall Street institutions falter, Richmond feels the tremors. But the details of how all this will play out locally are anyone’s guess.

Pat Fishe, a professor of finance at the University of Richmond’s Robins School of Business, said that the day’s events have several local ramifications. National banking activity could slow, and with our substantial banking sector, that could mean slowed growth locally, at least in hiring.

Business loans could become harder to get as the collateralization – where firms like Lehman Brothers sliced and diced commercial and residential loans and sold them to investors– slows.

If Merrill Lynch is indeed bought by Bank of America, the local offices of the stock brokerage will hang a new shingle. Or maybe not, but they’ll have a new corporate overlord. Whenever that happens, some brokers decide not to make the switch, and sometimes customers don’t want their money handled by a new firm.

“Merrill Lynch will do everything to keep their best performers … They also don’t have a lot of overlap on the same type of products,” Fishe said.

“If I had to speculate what they’d do, I’d say the Merrill Lynch side of the business is better off in retail sales than Bank of America. What they’ll do, access Bank of America customers list, call those guys up and say, ‘We’ve got some more interesting things the bank couldn’t sell you till now.’”

But the bigger worry locally, according to Michael Jones, a chief investment officer and co-founder at Riverfront Investment Group, is local money tied up in AIG products. Read more about that here.

“The risk is that you have State 503b plan with AIG or do you have a variable annuity from AIG? What is your real financial exposure should AIG not pull through the liquidity crisis right now? The retail investor has some things to find out today.”

The huge sell off on Wall Street also hammered local stocks.

Media General fell almost 20% on Monday to close at $8.54. All media stocks suffered in a big way on Monday, but this is the first time Media General has fallen below $10 a share in decades. The stock has lost more than 75% of its value in the last two years.

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