Credit crunch?

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Don’t panic. Those are probably two words left unsaid on Wall Street on Monday when stocks plunged after the $700 billion financial bailout was voted down by the U.S. House of Representatives.

But as for folks on “Main Street” in McHenry County, financial experts and bank executives advise that the local impact is not as harrowing as it seems. Yet our country’s leaders have warned that no one is immune from what might turn into a recession.

So, which is it? It’s difficult to say.

Allen Bronton, a senior wealth consultant with Wealth Preservers LLC in Crystal Lake, said many people don’t truly understand what’s happening with the economy – today or into the future.

“The economy as a whole has increased in productivity, so it’s not necessarily an all-out economic problem; it’s a problem in the financial sector,” Bronton said. “I don’t think it’s a time to panic, but it’s a time to be frugal.”

But as far as frugal goes, some don’t have a choice when lending standards for credit and home equity lines have tightened at many banks across the country. Although Bronton said McHenry County was a “bit better off” in terms of being mostly middle class, the area still had been dealt a bad hand with the ongoing housing crisis.

Pat Callan, president of the Illinois Association of Realtors, suggested that first-time homeowners with low down-payments consider an alternative FHA loan process.

"Lenders are reviewing their home equity loans with borrowers and in some cases they’ve reduced the lines, in some cases they’ve withdrawn the lines," Callan said. "It is affecting the availability of credit because they do not have an appetite for risk at this stage."

Although some consumers might be thinking about tucking their money away under mattresses, local bank executives say that’s not necessary. Most banks are insured through the Federal Deposit Insurance Corp., which is designed to keep customers’ deposits safe.

Kathy Marinangel, president and CEO of McHenry Savings Bank, said community banks differed from those investments of Wall Street. She said her bank's process of reviewing borrowers’ credit for mortgage, personal and commercial loans was the same as always.

“They should have confidence in their local community banks,” Marinangel said. “It’s just these larger firms that did a lot of subprime lending that have the problem. Our bank did not make one subprime loan.”

But the American Bankers Association, a bank industry trade group, contends that any bank might be affected because its customers might increasingly have trouble repaying their loans.

Edward Yingling, president and CEO of the ABA, said in a news release Monday that a bailout was necessary to “ensure that credit is available to consumers and businesses on Main Street.”

“There can be no doubt that the freezing up of the world’s credit markets and the loss of confidence we are seeing will, if left unchecked, dramatically impact consumers and businesses of all sizes,” Yingling said in the release.

Bronton agreed that confidence was needed to begin trades again. But rather than setting up a bailout fund, he suggested a guarantee fund to let the markets determine that value.

Until a solution is reached, however, all bets are off on the length of this financial crisis.

“That’s the $60,000 question, how long will this last? It will last at least until something gets done,” Bronton said. “Once the credit markets get moving and they can remain liquid, that can start to help to repair things. When will that happen? Well, that’s another $60,000 question.”