By Marilyn Odendahl, Truth Staff
modendahl@etruth.com
SOUTH BEND -- Some of the panic from the bailout of the New York investment bank Bear Stearns has reached from Wall Street to the local Main Street.
Randall Foster, president of the KeyBank Northern Indiana District, recently fielded a couple of calls from customers worried about the health of their bank and the safety of their deposits. After he explains KeyBank is a retail bank which has money to lend and where accounts are insured by the federal government, the clients are no longer thinking of burying their money in their backyards.
However, the conditions causing the economic downturn are continuing to make the stock market, businesses and consumers nervous. While the local area has not seen the wild drop in the housing market brought on by the collapse of subprime lending, it is feeling the effects of tightening credit and a weakening dollar.
"There's still a lot of uncertainty," said Brian Hall, an executive in the assurance and financial advisory division at the Crowe Chizek office in Elkhart. "We're not on the upswing yet."
For the recreational vehicle and manufactured housing industries -- mainstays in Elkhart County -- the credit crunch could be slowing sales by preventing potential buyers from getting the necessary bank financing needed to purchase the big-ticket items, Hall said.
Since September 2007, the Federal Reserve has cut interest rates six times to its current 2.25 percent. The cuts are meant to spur economic activity but they also are weakening the U.S. dollar. As local companies have increased the volume of products they purchase from overseas, Hall said, they will have to pay more for parts and components.
In addition, the weak dollar is making American companies bargains for foreign investors. American "jobs would be relatively safe," during takeovers by offshore businesses, Hall said, but the profits from the companies would be drawn out of the United States and spent in the foreign countries.
To recover, Hall said, the housing market and financial institutions will have to stabilize. Consumers and businesses also will have to regain some confidence and start spending.
At Concord Mall, Robert Thatcher, general manager, knows in this economic climate family budgets are being squeezed and "the consumer is clearly under pressure." The mall ended 2007 with sales that outpaced 2006 by a half-percent, however, and it is continuing to position itself as a destination for shoppers as tax refunds and federal economic stimulus checks arrive.
Any bump in consumer spend may be small and brief. A February study by the Reuters/University of Michigan Surveys of Consumers found that 82 percent of those who will be receiving economic stimulus checks plan on saving the money or paying down debt.
Like he does with his worried customers, Foster provided perspective, saying if the country slips into a recession, "it's not death." Historically, recessions last six months to a year and tend to correct themselves.