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Wall Street fallout affects consumers

Sept. 15, 2008 at 8:59 AM   |   Comments

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NEW YORK, Sept. 15 (UPI) -- Home mortgages shouldn't be affected by news about two U.S. investment giants but economic experts say Wall Street's woes haven't reached bottom yet.

Peter Morici, an economist and professor at the Robert H. Smith School of Business at the University of Maryland, said home prices could be affected if the collapse of Lehman Brothers and sale of Merrill Lynch lead to a significant, sustained drop in stock prices, The Washington Post reported Monday.

"But I don't see that happening," he said, adding that the availability of mortgages shouldn't be affected.

People who own stock in Merrill Lynch and Lehman Brothers face some risk, the Post said.

Merrill Lynch, which agreed to sell itself to Bank of America for roughly $50 billion -- has billions of dollars in assets linked to devalued mortgages and has faced a tight credit squeeze. Lehman says it will file for Chapter 11 bankruptcy and common shareholders are the last for claims on assets.

Money market funds and other holdings invested through Lehman Brothers or Merrill Lynch are safe, said Securities and Exchange Commission spokesman John Nester.

Morici was emphatic that Wall Street's ills haven't bottomed out.

"We're not going to hit the bottom of the stock market yet because the economy hasn't bottomed out," he told the Post. "The economy is slowing and even without Lehman, the economy is headed for a bottom around the beginning of the new year."

© 2008 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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