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Downturn Makes Investments Affordable But Risky

Large drops on Wall Street have made many stocks more affordable, but large investments are likely still risky.

That’s according to personal financial consultant Layne Wilkerson, who says the mantra of ‘Buy low, sell high’ still stands.

“I would spread it out over a systematic time period, maybe $1,000 a month until it was all invested,” he says. “That way you don’t take a risk of putting it all in at a high point and then we see it decline 20% in the next couple weeks.”

Wilkerson made his comments on WFPL’s State of Affairs program Wednesday.

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Local News

Yarmuth Supports Bailout Package

Kentucky Congressman John Yarmuth reluctantly supported the economic recovery package that cleared the Senate this week.

Yarmuth was one of 228 House members who opposed the previous recovery package on Monday.    He isn’t happy about the new bill, but he says it’s necessary in order to calm the public and prevent a total economic meltdown.

The recovery package includes a $700 billion bailout of the country’s financial sector. It also includes millions of dollars in earmarks, which Yarmuth says are extraneous.

“I think that was a horrible thing for the Senate to do,” says Yarmuth. “I think it undermines the credibility of this proposal and I think it undermines the credibility of Congress.”

Yarmuth acknowledges that the likely won over some colleagues who voted against the first bailout package,  by bringing extra money to their districts.

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Arts and Humanities In-Depth News Local News

Givers, Nonprofits Feel Pinch of Financial Turmoil

The turmoil on Wall Street has more than banks and businesses on alert. Foundations and nonprofits here in Louisville are bracing themselves for the fallout. WFPL’s Elizabeth Kramer reports.

It was just days after Lehman Brothers filed for the biggest bankruptcy case in U.S. history when the Association of Small Foundations held its annual conference.

The association’s Tim Walter took a survey of the attendees.

“Ninety-four percent of them said that they felt that the recent turmoil was more serious than previous shocks such as the collapse of Enron, the bursting of the dot-com bubble or the decline following the nine eleven attacks,” Walter says. “And actually eighty-four percent of the respondents said that their endowments were down this year, some dramatically.”

Louisville’s foundations are considered small, but, each year, they give away millions of dollars to local nonprofit organizations.

The current financial crisis has local foundations thinking about their investments and how nonprofits they support will weather the storm.

Mason Rummel is paying close attention. She’s with the area’s largest foundation, the James Graham Brown Foundation.

“We’re going to sit and watch it and we’re going to keep talking to our managers about their strategies and why they’re staying where they are,” Rummel.

Rummel and other local foundation leaders say these days they have conservative and highly diversified investment portfolios they hope can counter market shocks. But they point out that any sharp downturn will surely affect future grants.

The news comes at a time when many arts and social service organizations are already dealing with substantial cuts in government funding. The Humana Foundation’s Virginia Judd says that has implications for foundations.

“There’s been a reduction in state funding and national resources are more limited and so I think there’s an expectation that foundations need to step up to the plate,” Judd says.

So, how much money do local foundations give away? In 2007, the Brown Foundation gave more then $20 million, and The Humana Foundation gave more than $8 million. Actors Theatre of Louisville and Brooklawn Child & Family Services both got money.

Brooklawn has programs for emotionally troubled boys, and here Humana Foundation money underwrites drumming classes. Staff member Dennis Roach.

“It helps teach discipline and they enjoy coming in and doing it,” Roach says. “And so they work hard and they work on that level of working on themselves.”

Brooklawn’s president, David Graves, says that the agency has had to scale back because of cuts in government funding and it’s been a clarion call.

“We’ve got to be more efficient,” Graves says. “We’ve got to combine our resources to meet the growing needs. So, we will be in dialogue with other agencies, a way of sharing operations, a way to collaborate.”

In recent years, Brooklawn and other nonprofits have merged staff and programs. It’s a strategy local foundations find encouraging, says the Brown Foundation’s Mason Rummel.

“The pressure’s on now and so the nonprofits are going to have to get very creative, because, while we recognize what’s happened in the whole philanthropic world, we can’t make up for it, even as large as we are,” Rummel says.

Leaders of local foundations and arts and social services say they will be working to tap into that creativity to deal with any future decreases in government and foundation funding that could cut into the bone of their core missions.

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Local News

Many Kentucky Banks Unharmed

Conservative business practices have protected most Kentucky banks from being damaged by the Wall Street financial crisis. That means they’re able and willing to extend credit to eligible customers.

When high risk mortgages became more common nationwide, Kentucky banks generally avoided the trend. Kentucky Bankers Association General Counsel Debra Stamper says the current financial crisis caused by risky loans hasn’t changed the way banks do business in the Commonwealth.

“As I understand it from talking to banks, they have not significantly tightened or changed their underwriting standards for loans, which means if you were a good credit risk for them two years ago, you’d be a good credit risk for them now and they’d be happy to make you a loan,” she says.

But Stamper says further fiscal downturns could hurt consumer confidence and, in the worst case, cause runs on banks.