WTOP answer desk: Your questions on the economy

With the economy in flux, WTOP has been touching base with experts, asking your questions. The answers are below.

Thousands of people continue to be laid off. Are the unemployment numbers expected to rise even higher?

If you are in health care or education, you may be fine, especially if you also have some IT skills. Experts say those are two bright spots in the increasingly dark unemployment picture. But one Wall Street firm recently predicted a rise in unemployment to 9 percent. October figures from the Bureau of Labor Statistics find joblessness is already over 9 percent in Michigan and Rhode Island. Unemployment in Virginia is 4.4 percent, in Maryland it is 5 percent and 7.4 percent in the District.

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Should I pull my 401(k), IRA and TSP out of the stock market and invest more conservatively for a while?

If you are close to retirement, financial advisors say you should have been more conservatively invested already. But if retirement is 20 or 30 years away, investment professionals recommend that you keep contributing. They say there is time to recover, and time is -- quite literally -- on your side.

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Is this a good time to buy a car?

The short answer is yes. There are some very good deals right now. But making major purchases is not as easy as it once was because many people cannot get credit. Before you risk over-extending yourself, guard your credit score. Financial planners recommend maintaining a score that is at least 700, if not higher.

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There have been five bank failures so far this month. Is the money in my account still safe?

The FDIC prides itself on depositors never having lost a penny, and the federal government continues to be sharply focused on maintaining confidence in the banking system. Accounts in the failed banks -- as in all banks -- are still federally insured.

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Now that the federal government has agreed to prop up Citigroup, will I see any changes at my local Citibank?

You may. Citigroup last week announced its intention to lay off about 50,000 employees. Some branches may be closed and the lines could be longer at branches that remain open. But your money is still safely insured by the FDIC.

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Citigroup was trying to acquire Chevy Chase Bank. If another financial institution takes over Chevy Chase, what changes will I see?

When banks change hands, the biggest change is usually the name and logo. Day-to-day depositors usually find very little that is different.

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Where can I find information on the financial soundness and safety of banks and credit unions?

Bankrate.com rates the safety of banks and credit unions. You also can find financial statements for banks at the Federal Deposit Insurance Corp. and at the National Credit Union Administration.

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My five-year adjustable rate loan will soon be up. Should I try to get a fixed rate loan?

"If you're thinking about refinancing your ARM loan and converting it to a fixed rate loan, it's certainly a good idea," says certified financial planner Frank Boucher of Boucher Financial Planning Services in Reston, Va. "However, many mortgages are higher than the properties are worth. That's going to create some problems for you because no one is going to refinance your loan."

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The nation's financial situation makes me nervous? I have multiple credit cards. How should I go about paying these off?

"Credit card debt has never been a good idea, and financial planners have been harping on that for years," says certified financial planner Frank Boucher of Boucher Financial Planning Services in Reston, Va. "Unfortunately, it takes a situation like this to bring this to light."

Boucher's advice: Make minimum payments on the higher balances and attack the lowest balances first. Once you get the lowest balance paid off, start on the next lowest and work your way up to the credit cards where you have the most charged up.

Starting with the smallest balances gives you a psychological boost.

"It will make you feel a lot better, and human nature being what it is, it will give you the impetus to keep on paying off those credit cards."

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With Citicorp taking over Wachovia, what happens to my existing accounts?

Because bank accounts are federally insured, there's really little chance of depositors losing their money. It may be a bit inconvenient as the change is made, says certified financial planner Frank Boucher of Boucher Financial Planning Services in Reston, Va.

But you have to keep things in perspective.

"The banks are pretty well equipped to make these transitions pretty seamlessly. Banks have been merging left and right for a long period of time. They know how to merge accounts and change account numbers and do these sorts of thing," Boucher says.

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My 80-year-old mother has more than $100,000 in savings at Wachovia. We understand that she needs to make two accounts, but where? How does an average consumer know which banks are stable?

"What I would advise your mother do to is to take the excess over $100,000 out of her account in Wachovia and open it up in another local bank in the area," says certified financial planner Frank Boucher of Boucher Financial Planning Services in Reston, Va.

"The smart thing would probably be to take the money out of Wachovia and put it into another bank. Splitting it up now is probably a good idea. There's no reason to take risk if you don't have to.

"It certainly isn't a bad idea to spread your savings among various institutions."

You can find out more about individual banks through the Federal Deposit Insurance Corp.'s Web site.

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With a Senate vote still to come on the rescue package, what does the uncertainty mean for your money?

Because the U.S. has been a financial leader, you need to watch the reaction of the overseas markets, says John Wordock, managing editor of MarketWatch Radio Network.

"There's a sense now that we have stumbled and broken a leg, and how quickly are we going to recover from that. That's one thing everyday investors need to watch out for, how do the overseas investors react to that.?

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All of my student loans are through Wachovia which has been bought by Citigroup? What does that mean for me? I graduate in May.

Likely it will mean little change. Citigroup would take over your loan.

If you are worried, contact your bank.

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How can there be a financial crisis when I keep getting credit card and mortgage loan offers in the mail?

"Well, credit card companies of course want your business because that's how they make money," says John Wordock, managing editor of MarketWatch Radio Network. "So you will continue to get credit card offers and you will continue to see things in the mail. Keep in mind they are desperate for business right now so they need to bring as many people into the fold as possible because that means more money for their bottom line."

Wordock says now is the time for consumers to ask some tough questions especially if they are concerned about job security.

"Do you really think it is the right time to take out another credit card, or try to buy a bigger house? So you got to make some very personal decisions about what's right for you at this time."

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I have a 30-year fixed rate mortgage with Washington Mutual. Will the J.P. Morgan-Chase takeover affect my mortgage?

"Your mortgage loan will not be affected in any shape or form," says Barton Eckert, of the Washington Business Journal. "The exception perhaps will be to where your money is eventually paid, whether it is a deduction from your account or if you send a check."

He adds, "The money is still owed so keep making the payments to the address you have now until you get some advice otherwise from the bank on where you should send money."

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I have a retirement fund that includes CDs, mutual funds and some foreign investments that's managed by AIG. If AIG fails will I lose my money?

"What we understand is AIG and its subsidiaries are functioning well," says Bloomberg economic reporter Vinny DelGiudice.

"They've even said that some are making money. The holding company had some problems. There has been some interest on the part of some investors of actually buying different operations such as investment branches. People invested in some subsidiaries should be okay (based on AIG and news reports). Check with your representative or your lawyer because every individual situation is unique."

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I keep my money in a major credit union. Where do credit unions stand in this financial crisis?

"Credit unions are insured just like banks, savings and deposits," says Bloomberg economic reporter Vinny DelGiudice. "Check with individual institutions and ask them for an annual report, look in local newspapers and on the Internet. Again, deposits at credit unions are insured just like deposits at banks."

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I have a 30-year, 5.5 percent fixed rate mortgage with Washington Mutual. Will it be affected following the company's collapse this week?

"This looks to be a fairly seamless transition for people who do business with the institution simply because J.P. Morgan and Chase are buying the branches and assets," says Bloomberg economic reporter Vinny DelGiudice.

"The assets include mortgages, so it shouldn't be a problem. It maybe the biggest U.S. failure in history but they didn't even tap the government deposit insurance fund. The acquisition by J.P. Morgan took care of everything."

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What's the outlook right now for prospective home buyers?

The numbers we keep getting on the economy suggest the housing market has yet to hit bottom," says Bloomberg economic reporter Vinny DelGiudice. "Some economists say that some point in time, prices are going to fall far enough, fast enough that there will be some opportunities."

"But again it goes back to how much money you can put down, credit availability with the credit crunch a lot of banks simply won't lend money to people as readily as they did a few of years ago. That's how a lot of this trouble began," he says. "At the same time, if you are a good credit risk, you might wind up paying a little bit more than you did. Certainly it's a buyers market. Another question is will do prices keep falling and that's a hard one to call."

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Does this bailout mean lower interest rates for mortgages?

In the last week, mortgage rates spiked.

"There is a lot of uncertainty about what's going to happen with the economy, given what is going on on Capitol Hill with the bailout rescue effort," says John Wordock, managing editor of MarketWatch Radio Network. "Who knows where mortgage rates could go, they could go up potentially."

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I've been generally unhappy about the past performance of my IRA makeup and was on the verge of switching to a different IRA fund manager and different IRA makeup (more aggressive). Would it be a mistake to do so at this time?

The answer to this depends on your age. If you are close to retirement, you may want your portfolion to be more conservative, says John Wordock, managing editor of MarketWatch Radio Network.

"If you are younger, it's OK to be more aggressive because you have a longer time horizon," Wordock says. "If you are in your 20s or early 30s, you still technically have about 30 years before your retirement. Who knows what it will be like 30 years from now. You might have to work until you're 90. How you invest should depend on the bigger picture and the longer time horizon."

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The bailout plan will increase the already huge deficit. Won't that hurt the very same financial institutions we're trying to rescue?

There is some truth to that, says John Wordock, managing editor of MarketWatch Radio Network.

"We are heading toward more and more debt it seems. Whoever is the next president is going to inherit quite a hole here, which means the next president will probably have to hike taxes a lot."

As for interest rates, the big concern now is inflation. Wordock says the Federal Reserve will has a tough assignment. It will have to decide whether to hike interest rates to deal with inflation or cut interest rates to stimulate growth

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With the economy in flux, does the diversify, diversify, diversify rule still apply for your investments?

Yes, you still want to diversify.

"What you don't want to have is all of your investments going up and down at the same time," says Peter Tanous, president of Lynx Investment Advisory. "What we've been through, this horrendous period we've been through in the market, is why that is the case.

"You want to have bonds and stocks and commodities, like gold or energy, in your portfolio because it smoothes out the ride."

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I hope to retire soon. With the market the way it is, what should my investments look like?

"If you are close to retirement, your portfolio should reflect that by being much more conservative than it was when you were 40 or 50," says Peter Tanous, president of Lynx Investment Advisory.

"By the time you reach retirement, you're going to need that money very soon, so you should be taking risk out of the market. In most portfolios, risk is in stocks."

His recommendation: a portfolio that is 10 percent or 20 percent in stocks and the rest in a combination of tax-free municipal bonds and very high quality corporate bonds.

Other financial advisers suggest you look at your portfolio in relation to your other retirement income sources, such as Social Security and pensions.

Kiplinger's has a retirement calculator that may help you.

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If home mortgages was where the problem started, why doesn't the government just reduce the interest rates to make loans more affordable?

"Well there's been some evidence that with the government takeover of Fannie Mae and Freddie Mac - the two biggest mortgage financiers -- that now that they've stabilized, that some interest rates and some mortgage rates have settled down," Bloomberg economic reporter Vinny DelGiudice says. "There's other things to take in mind here, besides housing. Housing is where the fire started. Now it's spreading elsewhere. Financial institutions, all types of complex transactions that some of them are so complex, that even the so-called experts -- the bankers -- don't even understand what they've gotten themselves into. So all of these things play into this. It started with U.S. housing, but that's like the cigarettes that fell on the leaves in the forest. Now the forest is ablaze."

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Why should I be dealing with other people's mistakes?

"First of all, its important not to confuse Washington with Wall Street," Bloomberg economic reporter Vinny DelGiudice says. "Obviously, there's a problem with the banking system. Obviously, something has to be done. This has been building for a number of years with the subprime mortgages, spending habits with Americans, speculation worldwide. Economic cycles are as common as the weather -- there's boom and there's bust. Washington is about politics. Politics economics and finances aren't always joined at the hip and there's posturing -- this is an election year -- bottom line, we have recessions. Recessions are normal. Recessions are ugly. But recessions happen and a lot of people say we've been in one for a while."

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Will the bailout help anyone besides CEOs? Why won't the government help the average person by controlling living costs and lowering gas, grocery and energy bills?

"I would like to agree with you, but that's not reality," Bloomberg economic reporter Vinny DelGiudice says. "A lot of supposedly smart people screwed up big time and it's affecting all of us. The government is the one with the deepest pockets. It's going to try to take these loans, salvage them, and sell them to other people who didn't make mistakes. Over time, taxpayers will probably - as strange as it may seem - reap the benefits from it and some of this money may be earned back and of course, a stable economy - if history is any guide - will emerge again. I wish it was more of a fairy tale, but it's not."

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I get a lot of offers for low or no-interest credit cards. With the economy the way it is, will these envelopes stop turning up in my mailbox?

"In general, you have a credit crunch and when you have a credit crunch, the idea is that you don't want to lend money to anyone else because you're afraid they can't get paid back -- that's what pushes the interest rates up," Bloomberg economic reporter Vinny DelGiudice says. "Most of these people say well, if you're a good enough credit risk, we'll lend it you, but we'll charge you more than in the past. Maybe for some banks, this is a sign of desperation. We're talking like all of this is going to happen ... We're here. We've been here for a while. We're in the ashes. Now we're trying to dig out."

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My company's 401(k) is with Morgan Stanley. Will it be affected by Morgan Stanley's move to become a bank?

Your 401(k) likely will not be affected by the move. Morgan Stanley and Goldman Sachs are making the move into banking in order to take advantage of different accounting rules and gain more access to federal funds. By making the change, Bloomberg reporter John Lamb says these companies can avoid further write-downdowns by moving some assets into their banking units.

BusinessWeek reports the financial books of the two companies already have the look of banks. They built cushioning for a soft landing by retooling themselves and raising capital.

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My husband and I are 55. I retired in January 2008 from the federal government with a good pension income and left my TSP (~$152,000) with plans to have monthly withdrawals when I reach 59-1/2. However, with the economy so bad I'm thinking of paying off our home mortgage of about $95,000, using my TSP. This is our only debt, and we have other savings in CDs, money markets, etc. My husband is planning on retiring next February from the U.S. Postal Service. Would this be a good idea?

"Most of the Thrift Savings Plans have lost money over the past quarter. Paying off the home mortgage might not be a bad idea if you have a home mortgage that is 6 percent or above," says Bloomberg reporter John Lamb.

"Don't forget, however, when you pay off that mortgage, you will have eliminated a major tax deduction, which is the interest on the home mortgage itself."

Anyone considering paying off a mortgage should first make sure he has higher interest credit cards and car loans paid off first.

The folks over at Motley Fool say rather than paying off a mortgage, you should get married to it.

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If oil trades in dollars, which helps explain why oil prices have risen over the past year (thanks to the weaker dollar), what are your thoughts on having commodity exchanges like the NYMEX price crude futures in, say, Euros?

"If the idea is to lower prices, I'm not positive that ultimately that is going to work," says Bloomberg reporter John Lamb.

"It has to trade in some type of currency. Don't forget the other side of that equation: If the Euro weakens against the dollar, oil prices would increase. That would mean that price of oil would not only be tied to supply and demand here in the U.S. but it would also be tied to the strength of the Euro, which we don't have very much control of. Here in the United States, we might be better off if it's just traded in dollars."

On another note, U.S. government officials are suggesting that a trader was responsible for running up oil prices on Monday, The Wall Street Journal reports.

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Why don't gas prices come down as fast as they come up?

When you hear about crude oil prices, you're hearing about crude oil futures. For example, today's prices are for November delivery.

"We don't put crude oil in our cars. It has to be refined first. Gas prices are often raised with the futures jump but they don't often decrease unless futures are down for a longer period of time," says Bloomberg reporter John Lamb.

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I have a fixed home equity line at 5.99 percent. At my credit union variable rates are down around 4.5 percent. What are the pros and cons in switching from a fixed rate to a variable rate?

"Obviously the pros of switching to a lower variable rate is that it will lower your monthly payments," says Robert Brokamp, a retirement expert with The Motley Fool, "but for me the cons far outweigh the pros.

"The cons are that, that rate won't stay down at 4.5 forever. 5.99 is still a pretty good rate, especially if you are taking out a big loan that is going to take you a while to pay off. I'd stick with that lower fix rate than trying to go down to a lower variable rate that may go up above 5.99 down the road."

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We keep hearing about the U.S. dollar. What are the pluses and minuses of investing in other currencies -- and how are they impacted by the relative strength of the dollar?

"Every investor should have some exposure to other currencies," says Robert Brokamp of The Motley Fool. "The best way to do that is to buy other investments in other countries."

"For example, international stocks, every investor should have a little bit of exposure to international stocks. When the dollar drops, your international investments move up automatically, even if the actual price of the stock didn't move, the value of it actually increases as the dollar decreases."

Brokamp warns against trading currencies. "Actual currencies are very volatile and kind of expensive to trade. Most people do not make money."

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What would happen if other countries lost faith in the U.S. dollar -- or called our debts due?

"If other companies lost faith in the U.S. dollar," says Robert Brokamp of The Motley Fool. "They would stop investing in U.S. investments, for example U.S. treasuries. That would be very bad for us as country, because as it is now we spend more than we make."

"So, we have to borrow a lot of money from other countries. If other countries decided they didn't want to lend to us anymore our interest rates would have to rise significantly to entice them back into the U.S. market."

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What if you have life insurance through AIG? Should you be concerned about your coverage when it comes time to make a claim?

"While everyone talks about AIG as a large insurance company," says Robert Brokamp of The Motley Fool. "It's actually a very big financial conglomerate.

"The insurance part of AIG is very sound, because insurance in America is regulated by the states, and the states actually do a very good job of making sure insurance companies actually have enough money and don't do anything silly with the money they've collected. On top of that, all states have a guarantee fund so that if an insurance company goes under the state will cover many of the claims. Most states have $100,000 coverage, many states have more than that."

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I have a home equity line of credit for $45,000. I've taken out about $3,000 this summer for a total debt of $15,000. How dangerous is this? I really need the extra money, right now.

"It's OK, generally, to tap your home equity line if you are doing home repairs. Maybe you have to fix the roof with winter coming," says John Wordock, managing editor of MarketWatch Radio Network.

"But if you are thinking about going out and buying a fancy sports car with your home equity line, perhaps now would not be the best time to do that. You should be watching your money very carefully. Now is not the time to be tapping your most precious asset -- your home."

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I really must sell my house right now. Should I simply take the loss and move, or are there other options?

"Basically if you do not have to sell your home, if you do not have to put it on the market -- don't. If you do not have to do anything, why do it right now?" says John Wordock, managing editor of MarketWatch Radio Network.

"If you do have to sell, one option that you may want to consider is renting. If you can afford to rent your current place and move somewhere else, try it.

"You need to weather the storm. If you are having problems with your mortgage, if the value of your home is simply less than what your mortgage is and you're under water, you might want to look at other options, like renting. And, then come back a year or two from now, hopefully, the real estate market will be better then."

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How will the Federal Housing Administration loan program that starts Oct. 1, 2008 help people who are struggling to pay their mortgages or who have seen their interest rates skyrocket?

People who are behind in their mortgage payments will be eligible for the FHASecure loans. The loans allow you to refinance your home and are available to those who have seen the interest rates on their interest-only mortgages reset.

The FHA offers a number of tips to help you avoid foreclosure.

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I am one who struggling to pay my monthly mortgage. It tried of to contact with my lender, but the lender has ignored me for about five months. What should I do?

"It's cheaper for the lender to try to do a workout with the borrower then to have to go through foreclosure if the borrower simply stops payments entirely. Sometimes lenders will only negotiate when you have stopped payments," says Elinda Kiss, a finance professor at the University of Maryland, Robert H. Smith School of Business.

"I'm a little bit surprised the lender isn't responding at all. Certainly, he should continue to reach out to them. He also could get in touch with the Hope Now Alliance and see if they can get in touch with them," says Stephanie AuWerter, editor of SmartMoney.com.

The Hope Now Alliance provides homeowners who are in trouble help for free. The number to call is 1-888-995-HOPE.

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I have two money market accounts one with Intervest and one with Capitol One. How would I find out if these accounts are insured by the federal government?

"I think a lot of people get confused because there are two different types of accounts available," says Stephanie AuWerter, editor of SmartMoney.com. "One is a money market fund... then there is a different type of account that you get at your bank that is a money market account. Part of the beauty of the money market account is that they are FDIC-insured."

The Federal Deposit Insurance Corp. insures money market accounts through banks.

What's not currently insured are money market funds. These are short-term debt investments held by mutual funds. BankRate.com explains the differences between money market accounts accounts and money market mutual funds.

The current Treasury Department proposal would shore up the money-market sector and allow money market funds to pay a fee to get FDIC insurance. More on this at MarketWatch.

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What will be the trend for the 30-year fixed mortgages?

"Rates are probably going to go up in the longer term, but you'll see some variability short term. My advice : Save your money and basically get a lower rate now," says Arkadi Kuhlmann, CEO of Savings at ING Direct.

If you're going to buy, don't forget to ask your builder to put some sweat equity into your home.

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Last week I was approved for a loan modification with America's Servicing Co., a subsidiary of Wells Fargo. I signed all paperwork, paid my contribution amount and received a call that it was received. I am able to afford my mortgage, but went through a period of financial hardship. I am not in an ARM. I am concerned that even though I have received a loan modification, I can be foreclosed on before I may the first required payment on the modified agreement, which is Nov. 1. Should I be worried? When I call ASC, they tell me all is fine, but I am still scared. Also, what happens to my loan, which is technically in default, with the new government bailout plan? What should I do now and what should I be aware of the protect my home?

The bank is obligated to give you the terms of the loan. You'll find the terms in your closing documentation. Arkadi Kuhlmann, CEO of Savings at ING Direct, syas you need to understand the terms and conditions of your mortgage. There are options when banks can change the interest rate or the conditions of your mortgage, you need to know those. If you are really worried, consult a professional to help you understand and enforce your contract.

"If you're in default of your loan, that's a different story. You're going to have to some remediation. Maybe the modification will allow you to reduce your payments or extend the term of your mortgage. The bailout is really for the banks, not individuals," says

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I want to know if this is a good time to refinance my home if I have an ARM that is to "expire" in about a year. My current ARM rate is 5.125 and I can get a 30 year mortgage at 5.7 without points or origination fees. Would you advising waiting to see what the market does or should I jump now?

The answer depends how long you intend to stay in your home. If you are thinking about moving in the next five years, it's probably not good to refinance. Arkadi Kuhlmann, CEO of Savings at ING Direct, says you need to be sure you calculate all of the costs involved before you make your decision.

Mortgage rates last week fell to their lowest level in seven months, The Washington Post reports.

Right now, the best priced loans for those with stellar credit are 30-year fixed loans, reports the Christian Science Monitor.

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What happens if the bank holding with my credit card and mortgage loan goes bust? Will I have to pay off the entire mortgage loan and credit card at once?

"Don't worry about it," says Arkadi Kuhlmann, CEO of Savings at ING Direct. "You have a contract with them. Even if they go bust and seized by the regulator, you're in good shape. Whoever ends up buying that institution or managing that institution after they go bankrupt will have to live up to the same terms and conditions. Nobody can force you to pay back a mortgage early. Your credit cards, the same thing. They can with notice periods reduce the limit on your credit cards. That means if you have a line for $10,000, they can reduce it, but they can't force you to pay it back any faster than you do."

Remember, credit cards carry a much higher interest rate than mortgages. You'll want to pay them down as quickly as you can.

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I own shares in an IRA account, should I roll them over to a new fund. What are my options?

"Rolling it over into a new account is not going to do anything for you. What are you invested in? What company or bonds are you invested in, in the IRA? I don't think there's any benefit in changing the status of making the IRA into something else, until you know what you've got in there," says Bob Lenzner, national editor for Forbes Magazine.

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What will the trend be for 30 year fixed mortgages? Are they going up?

"Rates are not that high right now," says Bob Lenzner, national editor for Forbes Magazine. "I don't know what the 30-year rate is. But my own feeling is there's going to be more mortgage money, and Fannie Mae and Freddie Mac are going to be able to offer guaranteed mortgages, and therefore, if you wait a little bit, I think you'll get a better rate."

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I have stock in Washington Mutual. If it is bought by someone else, will I lose my investment?

"I think you should show patience. The share are selling at two or three dollars a share, so what do you have to lose to wait and see what happens," says Bob Lenzner, national editor for Forbes Magazine.

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If you have a retirement fund connected to AIG should you be concerned about whether the money will be there?

"It's best to check with your investment advisor," says Bloomberg Economic Reporter Vinny Del Giudice. "We've been told by AIG in their official announcements that so many of the subsidiaries are fine and have money. I would just check."

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With so many failed companies should you buy stocks now while the price is down?

"There is always the possibility of finding a good bargain," says Bloomberg Economic Reporter Vinny Del Giudice.

"The trick is when to buy and when to sell. A lot of people will tell you the best thing is to find a few good investments, hold on to them and re-invest the dividends. Don't gamble. Nobody can consistently buy at the bottom and sell at the top. You are dreaming if you think that you can do that."

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How is my insurance policy affected when the issuing insurance company is downgraded?

"Most of these [companies] are watched by the state insurance commissioners, that the policies are regulated by the state. It's best to check with your state regulator, and there are also insurance rating agencies that you could probably find on the internet that could give you some peace of mind," says Bloomberg Economic Reporter Vinny Del Giudice.

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I'm considering putting my money in two money market funds. One is FDIC insured, the other is not. Can you give me some guidance?

Banks have money market deposit accounts, which are insured bank deposits. Money market mutual funds are different, they're considered a safe haven, but they've run into some trouble of late with the AIG and Lehman Brothers situations," says Bloomberg Economic Reporter Vinny Del Giudice.

"The Federal Reserve and the Treasury are now stepping up to provide insurance for the money market mutual funds that wish to get insurance. These actions come following several funds that have run into trouble. The best thing to do is check with the funds and check what the situation is. That said, the banks are covered by the bank insurance fund, the FDIC—they're covered already," Del Giudice says.

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I'm worried about my 401(k) from my former job. What are my options?

"The first thing I'd ask you is what is your 401(k) invested in right now. If your 401(k) is invested in money market funds, you're probably okay, but if you have something tied to the S&P500, then yeah you've had a lot of swings," says Bloomberg reporter John Lamb.

"Generally though, what we tell people about 401(k)'s is they are long term investments, and at the end of the day, or the end of the year actually, we may not be down very much, we may not be up very much. So you can it either stick it out and stay with that or you could try and move out of some of your stock funds and move them into safer Treasury funds or money market funds," Lamb says.

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How could companies have been allowed to grow so big that the government couldn't afford to let them fail?

"This is nothing new. We have seen this going all the way back to the days of the struggling auto industry in the 1970s and 1980s, and the big question back then was Chrysler too big to fail? And the government helped out," says John Wordock, managing editor of MarketWatch Radio Network.

"Now we have moved the playing field over to the financial sector, and you have these huge global companies get into trouble. We are seeing the marketplace, in some ways, play itself out here. The government is now finally stepping in," Wordock says.

Wordock says the crisis is a matter of saving the economy. Politics will be put aside, he says.

"You're going to have to have more active regulators getting involved in the process because we're up against the wall here, folks. There is no alternative. You need to have a healthy financial system, based on trust. And, right now, trust is not in the system, so Washington has to step in and restore that confidence and trust."

Bloomberg's Vinny Del Giudice agrees.

"When you have such a crisis as this, it's almost as though they are saying, 'What buildings can let burn down to save Chicago and what other buildings do we have to leave standing?' This is the free-market system, almost unbridled capitalism almost, if you let it occur. You have to take the good with the bad. It's a bit of social Darwinism," Del Giudice says.

In the case of Fannie Mae and Freddie Mac, Del Giudice says because Congress created the hybrid agencies, there's always been the implication that the government would step in and back them if something went wrong.

Wordock, who has talked with well-known Wall Street historian John Steele Gordon, says there will be a lot of rewriting of the history books.

Gordon tells Wordock the result will be a lot of government reforms in order to shore up the markets, as well as a lot more regulation and activism in Washington.

"There has been a sense that maybe Washington should have been more involved or the watchdog should have been more active -- at least that's what the buzz is among the Wall Street players that we've talked to," Wordock says.

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I got a reverse mortgage last spring will the stock market problems or anything else affect me?

"There are a lot of players out there who are in trouble, like Washington Mutual. You should find out who really owns your mortgage right now and what is the situation with that company," says John Wordock, managing editor of MarketWatch Radio Network.

How strong is the mortgage company's balance sheet?

If the company that owns your reverse mortgage is stable, Wordock says it's OK to continue taking equity out of your house. If it's not, you'll need to decide what to do.

Wordock says that may take a call to the company to ask "am I in trouble because of your troubles?"

In addition to finding out the company's stability, you'll also want to read the fine print in that mortgage.

The National Reverse Mortgage Lenders Association has a site that explains the basics of reverse mortgages.

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Is it a good time to bottom fish for stocks, especially those under $3?

"This could be a good time to purchase, if you believe that we actually hit a bottom on the market on Wednesday when the market went down 500 points," says Bloomberg business reporter John Lamb.

"Financial companies which have been beaten down the most clearly have the most to gain, but you better pick the right one. You don't want to purchase another Lehman Brothers or another Fannie Mae or another Freddie Mac."

Be forewarned: Some experts say tell Newsday wild market swings are likely to continue.

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I have a second house in R.I. It has a first and second mortgage. The first is an ARM and the second is a HELOC, so I could afford the house, back in 2006. The first adjusts on Nov. 1, going up $800 and I can't afford it. I have had the house for sale for about three months and have reduced the sale price three times. I intend to try a short sale. Do I have any other recourse other than foreclosure?

People are walking away from their homes and forcing banks to seize the properties when the payments stop. But John Wordock, managing editor of MarketWatch Radio Network, warns that if you do that that it's like "an atomic bomb going off in your credit history."

His advice: Consult a Realtor you can trust. Realtors have taken more active roles here in people sell their homes and helping negotiate deals with banks. You may want to consider a deed in lieu of foreclosure. That's where the bank agrees to accept the deed as full settlement. Another option might be to rent the property.

MSN offers up some other tips you may want to consider.

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What kind of protections exist for my 401(k)?

"There really is not a whole lot that protects your 401(k)," says Bloomberg's John Lamb. "The hope is that you put it into funds with these brilliant fund managers who have already figured that into their funds. For instance, a lot of times they will buy funds and then buy protection on the other side against the stock going down."

Lamb says in terms of government protection, you don't really have any. If you are really worried, you might want to look for a safer investment. But, if you think the stock market will rebound -- as it has in the past -- stick it out.

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The price of gold is sky-rocketing. Can you do well by selling your old 14K gold jewelery?

The answer from Bloomberg's John Lamb: Maybe.

But gold prices have been extremely volatile in recent weeks.

As for how well you'll do, the answer depends on the type of jewelry you have, how pure the gold is and how well made it is. A jeweler can answer those questions.

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I already work two jobs. Two of kids are going to be stuck with student loans because, supposedly, I make too much for them to get grants. Now I hear the rules are tightening on loans in general. How do I get my other two kids (and my wife) through college?

The answer depends on how old your children are.

"If your kids are just about to go to college, you could have a hard time getting a loan because of the credit crunch," says Bloomberg reporter John Lamb.

If you have three or four more years to save, there probably won't be the same type of problem in the future, Lamb says.

But you need to be aware that the federal financial aid system may radically change, reports Education Week.

The College Financing Guide offers some advice for financing an education.

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I bought my house in 2006 when prices were at their highest. I am currently upside-down on my mortgage. Although I can still afford the payments, I feel like I'm just dumping money into a sinking ship as the value of my house keeps dropping. What should I do?

"If she can still afford to make the payments, there's a good chance some day down the line housing prices are going to increase and they're probably going to go past what she paid for it," says Bloomberg reporter John Lamb.

The New York Times reports more people are finding themselves in the position of being upside-down on their mortgages.

About 10 million homeowners have negative equity, according to Moody's Economy.com.

Lamb says anybody in this situation has to ask himself a few questions: "Do you want to stay in this house? Do you love the house? Is it some place you really want to live?"

If the answer is yes to those, keep paying the mortgage payments.

If you don't like where you live, the bank might consider a short sale, a sale for less than the value of the mortgage. The option may be better than foreclosure.

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What is the status of stock shares in such companies as Fannie Mae that have been taken over by the feds? Are they dead in the water, or is it possible that they can recoup some of their value over time?

When you buy stock, you're buying a part of a company. "If you want to sell a stock, you need somebody on the other end who's willing to buy it. If the company is bust or broke or bankrupt -- if your stock has been wiped out -- who's going to want to buy it?" says Bloomberg's Vinny Del Giudice.

Other experts agree that you can kiss your Fannie and Freddie stocks goodbye.

Now, when it comes to the future. Nobody can see what's going to happen.

"They have a name for people who say they buy low and sell high, and that name is a liar," says Del Giudice.

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What happens to your mortgage when the lender (Washington Mutual) goes under?

In general, not much will change if Washington Mutual is sold. Financial experts say that other banks will come along and take over the mortgages. Likely, you'll just be sending your payment to another company.

The Business Journal reports one of Washington Mutual's biggest investors cleared the way for a cash infusion or its sale. New York investment bank Goldman Sachs Group is among those said to be interested in WaMu.

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What do expect will happen with mortgage rates?

"A lot of economists say now that the Fannie Mae and Freddie Mac situation is settled, interest rates, mortgage should probably go down," says Bloomberg's Vinny Del Giudice. "People will be more willing to lend. They may not let up on the lending rules."

Figures from the Mortgage Bankers Association show a 30 percent increase in mortgage applications last week as people switch from adjustable rate mortgages to fixed rates.

Some economists say the Federal Reserve may lower interest rates by the end of the year. "That could also help help bring down interest rates," Del Giudice says.

On Thursday, the Fed did pump billions into the financial markets in an effort to ease the strain on the system.

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I have been watching my 401(k) slipping away after 15 years of savings. I had hoped to retire in 6-7 years, but now will be lucky if there is anything left at all. Should I dump the stocks or ride it out?

Most investors will say buy and hold. Remain patient. Don't try to gamble with your money.

"Whatever you are invested in, you have to accept risks," says Bloomberg's business reporter Vinny Del Giudice.

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Is it time to take the savings from 401(k) and just keep it tight? It's losing its value.

Stay invested -- that's what most long-term investors will tell you to do. After the October 1987 crash, the market went down 25 percent in a day. People who held on made money by the end of the year, says Bloomberg's Vinny Del Giudice. Over the long-term, it's not unreasonable to expect a 5 percent to 8 percent return on your money, he says.

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Should I put my future contributions to my 401(k) in bonds or continue putting the contributions in mutual funds? I don't plan on moving the existing funds in the mutuals to bonds but am looking for advice on the next six months for my contributions.

Think over the long term when it comes to your investing. The economy will undergo ups and downs.

"Warren Buffett, chairman of Berkshire Hathaway, puts it best, Be scared when everyone else is greedy, and be greedy when everyone else is scared,'" says Bloomberg business reporter Vinny Del Giudice.

Kiplinger's reports there is a bright side to the current fallout, and offers some basics on investing.

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I have a huge amount of credit card debt and need to get debt-free. What is the best solution for me to pursue?

Experts say it's best to first pay down the balance with the highest annual percentage rate. Another alternative would be to pay off the little balances so you get a confidence boost.

Motley Fool offers nine suggestions for paying down those credit card debts.

If you are having trouble paying the minimums on your credit cards or you're late on your regular bills, you may want to go to a consumer credit counseling agency. Late payments are a big deal.

If you go to a counselor, here's what to look for. Be leery of companies that offer to settle your debt for pennies on the dollar.

Before you pay anybody, give WTOP's Call For Action a call at 30-652-HELP for a referral to a non-profit counseling service.

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My wife's parents (ages 93/90) have several AIG annuities. They will soon need to use some of the money from the annuities. Is there any insurance (similar to FDIC) that insures these annuities? If they want to surrender their annuities for their up and coming needs, will they be able to do so?

"There is insurance very similar to FDIC that insures annuities. It is state-by-state. The minimum is $100,000 and could go up to $300,000," says MarketWatch's Andrea Coombs.

AIG holds 71 insurance companies. Those insurance companies are operating as usual but may be sold in the future.

Check with your insurance provider to find out what your surrender charges would be. You need to weigh the charges against the likelihood the company will go under before pulling your funds out.

Kiplinger's has more on what the AIG bailout means to you.

U.S. News & World Report writes about what happens if your insurance company fails.

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I have significant funds in a traditional money market fund. While I know it is not insured, this fact has never concerned up to now. While I know you cannot opine on this fund specifically, how "safe" are investments in such funds in light of the turmoil in the financial services world?

Some of these funds are 'breaking the buck,' which means that every dollar you invest is yielding less than a dollar. A lot of funds are assuring their customers their funds are save. You may want to call your provider and find out what steps they are taking to protect your money.

The New York Times reports that if you picked a money market account because you wanted to avoid all risk, you may want to consider the money market deposit accounts and other FDIC-insured accounts, such as certificates of deposit and regular checking and savings accounts.

Also, nervous investors may want to ask their mutual fund companies or brokerages whether they have Treasury or government money market funds that invests only in Treasury securities, the paper reports.

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I'm a single mom with two children in college. Most of their educational expenses is covered by government grants and loan (FAFSA). Will grants and loans be affected by this economic crisis?

There are fewer lenders in the marketplace offering loans to students. While the government loans are still available, people with credit history problems may have problems getting bank loans. If you have a good relationship with your lender, that's to your benefit because that lender will want to continue to work with you.

"I would highly recommend talking to the financial aid officer at your college," says Andrea Coombs with MarketWatch. "They are right on the pulse of this, and they know what's happening . They know who is going to be offering loans."

Also, the U.S. Department of Education is out with a new Web site aimed at helping you figure out how to pay for college.

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I have several accounts at one banking institution: CDs, savings and checkings. If this bank falls, would I have a problem getting all of my money from these accounts?

"The first call should be to your bank or broker or financial advisor to find out just how bad the situation is and are you mired in that bad position."

- John Wordock, MarketWatch

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I have a car insurance policy with AIG that expires in November. Will AIG customers be able to continue their policy with whatever happens long-term with AIG?

"That is a very good question because AIG has to sell off so many of its parts potentially, which is apparently part of the orderly winding down of AIG as the Federal Reserve said in its statement. So, I would not be surprised that in the coming months you do get a letter saying someone has bought the auto insurance division that use to be run by AIG."

- John Wordock, MarketWatch

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I have some money in a money market fund at Morgan Stanley. I know it is not insured. Is it safe, or should I withdraw the funds and place in a bank savings account?

"If you're nervous, I wouldn't necessarily leave the money market fund world behind, I might go to a treasury-only money market fund, and I would certainly call and say, 'What kind of paper is in this fund?' If it's a fund that's investing in treasuries and government paper and its avoiding the corporate's -- I don't really expect that I would worry.

- Chuck Jaffe, MarketWatch

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Now that Fannie Mae is in conservatorship, is there any chance that shares will return to or approach 2007 levels? If so, could this happen within the next five years? Ten years? Or should I just forget about it and sell my shares now.

"Given where Fannie Mae is right now, things can only get better. You may want to just wait a while to see where this goes. Fannie Mae and Freddie Mac are not going to be the giants they use to be, they are going to transform and that could have implications on your investments."

- John Wordock, MarketWatch.com

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If you use one of the large investment banker brokerage houses as a stock broker (to buy and sell stocks, bonds, mutuals, etc.) for you, are your investments safe if the investment bankers goes bankrupt?

You should be covered by insurance. Your best bet: Contact your broker or the Securities and Exchange Commission. E-mail your questions to the Office of Investor Education and Advocacy at help@sec.gov.

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My husband is 42, and he has worked for himself or worked for places that didn't offer retirement. For years, I have been bugging him about getting a retirement plan, but something always comes along that takes precidence (health care costs, house repairs, etc.) He is now at the point where he is ready to sock some $$$ away, but now we are hesitant to do so because of the market. Should we go ahead and open him an IRA or should we open a CD and then wait awhile until the market stabilizes?

Any expert will tell you that you should save whenever you can. The advice from John Wordock of MarketWatch: Start conservatively with a CD and reevaluate in six months."

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If oil prices have dropped, why don't I see the same drop at the gas pump?

Well, we hear differing answers on that. One is it takes time for raw oil prices to filter down to the retail value. The other is gas prices are dependent on more than just crude prices. Refining costs fluctuate, as does the cost to transport gasoline. Also, taxes change.

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I'm a single mom who doesn't have investments or a mortgage and can barely live paycheck to paycheck. How will this crisis affect people like me?

The economic meltdown is being felt by you through higher food and gasoline costs. Big companies are experiencing higher transportation and energy costs and passing them along to their customers. The best thing you can do right now is keep a job, stay current on your bills and don't rack up huge credit card bills, experts say.

We're continually updating WTOP Saves You Money. That's where you'll find advice on everything from using cash to saving energy around your home.

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Our mortgage is with Lehman Brothers. What happens now?

The Securities and Exchange Commission is telling Lehman Brothers customers to e-mail them with questions. You can contact the SEC's Office of Investor Education and Advocacy at help@sec.gov.

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I have $12,000 sitting in a savings account. Should I withdraw it? Does FDIC really pay claims if I lost my savings?

Most state-charted credit unions and all federal credit unions are federally insured. Most banks also have insurance.

"The FDIC is really the last reservoir here. It is supposed to, by law, have money around in case something goes out of business, so I wouldn't panic with that one," says John Wordock with MarketWatch.

To learn more about whether your bank is insured by the Federal Deposit Insurance Corp. and what types of accounts are insured, click here.

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If my bank goes down, would I be able to recover the money in my checking account and write checks to pay my bills?

While banks are insured, if you are concerned, call you bank and find out specifically what procedures they have in place.

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Our credit union at the Census Bureau is insured by the National Credit Union Administration, which is a U.S. government agency. Is this comparable to being insured by the FDIC? Would we be safer switching our investments from the credit union to an FDIC-insured institution?

Washington is full of credit unions.

"If a credit union in Washington, D.C., goes out of business, the country might as well shut down because it's over folks," says John Wordock, managing editor, MarketWatch Radio Network.

The National Credit Union Administration is the independent federal agency that charters and supervises federal credit unions. Accounts are insured in a similar way to the Federal Deposit Insurance Corp., which insures banks. Accounts are insured up to $100,000 per account.

No money has ever been lost by a member of a federally insured credit union. The NCUA says if a federally insured credit union fails, you'll get your payout usually within three days from the time the credit union closes its doors.

The Federal Deposit Insurance Corp. insures individual accounts at banks and thrifts for at least $100,000.

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I'm 22 years old. I am speaking for my generation in which we feel overwhelmed with politics and the economy today. We are left questioning what we should do to plan for our future, especially financially. Do you have any advice for the mid 20s, as to what our guidelines should be for being financially comfortable in the future?

"Start saving as soon as you can, and come up with a game plan when you are 25, 35, 45, 55. Map out a plan and start now. If you only save $50 a week or a month, that's a start," says John Wordock, managing editor, MarketWatch Radio Network.

Choose to Save offers advice for how much you need to save for a comfortable retirement.

What should I do if all of our IRA/Retirement is at Merrill Lynch?

"I would hold on a bit because Merrill Lynch is going to be part of a family here, Bank of America," says John Wordock, managing editor, MarketWatch Radio Network.

"Merrill Lynch is actually a survivor. Yes, it is being bought by Bank of America. But, Bank of America, the last time we checked, is still a very healthy company, so ride out the storm here."

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A lot of people have their 403B retirement accounts with the AIG Retirement. If AIG declares bankruptcy what will the status be of the AIG retirement company and the balances of the 403B accounts?

All insurance companies are regulated by state insurance commissions. In the case of AIG, the New York State Insurance Department is the regulator, says Peter Tanous, president of Lynx Investment Advisory.

Tanous says policy holders rank ahead stockholders in liquidations. Typically, what happens is state regulators get a stronger company to take over. He says there is no long record of insurance company holders being wiped out.

Listen to WTOP's interview with Tanous.

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I have a IRA account with AIG. What would happen to my retirement account if AIG collapses?

In general, securities accounts are not part of bankruptcies and are not in danger. Those accounts are held in custodianship.

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My wife and I were advised recently by a financial adviser to take out new life insurance policies with AIG. Do you think that is even worth considering today given the status of AIG?

Likely, the life insurance policies are safe, says Tanous.

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My life insurance policy is with AIG. Should I be concerned?

Experts say, at least in the short term, you probably don't need to worry at all. The problems are with the AIG holding company, not the individual insu