Released: September 15, 2008

The effects of credit crisis at home

Source: Nancy Trejos, Washington Post (Free Registration)

The turmoil sweeping through the financial markets has left many people worried about their own stocks, bank accounts, and retirement funds. The tottering of investment bank Lehman Brothers, the weakening cash position of AIG, and the purchase of Merrill Lynch—all taking shape over the weekend—are forcing average investors and homeowners to ask serious questions about what steps to take now.

I own Merrill and Lehman stock. Should I panic?

Bank of America has shown a vote of confidence in Merrill with its $50 billion purchase of the brokerage. But there are risks. Merrill has billions of dollars in assets linked to devalued mortgages and has faced a tight credit squeeze. The company is a huge player in the retail brokerage market. If Lehman files for bankruptcy, its shareholders could suffer. In a bankruptcy, common shareholders are the last in line for claims on assets.

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