Several financial companies with bases in Iowa saw heavy losses in trading Monday, including Principal Financial Group, West Banc and Wells Fargo. The Lehman Brothers bankruptcy and the buyout of Merrill Lynch prompted the Dow Jones to fall more than 500-points, its worst single-day drop since just after Nine-Eleven.
Interviewed from Washington D.C., Iowa Senator Chuck Grassley, the ranking Republican on the Senate Finance Committee, says consumers and investors need to remain rational despite the appearance of chaos. Grassley says, “Exactly where we are, I’m not sure anybody in this town or anybody on Wall Street knows for sure, but the advice of Iowa bankers not to panic is the right advice.”
U.S. and world stock markets are still wobbly as investors worry prices haven’t yet hit bottom. Grassley says fears about another Great Depression are very premature. He says, “There’s a lot of measurement to the Depression years but if you go back to 1929 on an equivalent day when there was such a drop in the market, there were a lot of suicides and I haven’t heard of any suicides thus far.”
Grassley says there’s still much speculation and uncertainty with all of the recent financial shifts, including the sale of investment bank Bear Stearns back in March and this week’s shake-up with Merrill Lynch and Lehman Brothers. He says, “So those are lessons learned and I think that we’re in for a period of time of questioning but I do think that the overall economy is very strong and we’ll muddle through this.”
Grassley says he’s remaining hopeful the market will correct itself and that we’re heading for more solid ground now. Still, he says, a further slide could warrant lawmakers to take hold of the reigns. Grassley says, “I think it brings back Congressional consideration or the extent to which they already have power to do it, the S-E-C (Securities and Exchange Commission) to be watching over the market to a greater extent then they have in the past and maybe Congress will have to take some action.”
He says it all started with people buying homes without having their incomes and credit ratings checked while “irresponsible high prices” were placed on home values and bankers made loans that should never have been made.