Suze Orman Discusses AIG Bailout, Wall Street Crash Risk

First, a disclosure: I've been a guest on Suze Orman's show, speaking with her once by phone. Later, a letter of mine was read on the air. Also, for the record, her answers were not only to the point, but saved me hundreds of dollars, perhaps even more. I feel obligated to note that. She was one of many who helped me stay on course financially. So, I do like to hear what she has to say about the economy.

Even though I think she gave excellent advice to me, I'm guessing she'd be among the first to urge people to do their research and not follow any financial adviser blindly. If nothing else, she's taught me that finances don't have to be feared and that average people can learn and do more about their finances than they might think, which brings me to the AIG bailout and Suze Orman's discussions about that.

Suze Orman, the AIG Bailout and economic turmoil on Wall Street - and throughout the country

Our entire economy has been hard hit lately, as played out by recent events. In the last week, Lehman Brothers, a firm with a long history, was allowed to go belly up. But AIG was bailed out, after a weekend of confusion and speculation about whether that would occur. Suze Orman weighed in on that decision to rescue AIG, a topic she discussed during an appearance on Larry King. An edited transcript of that interview is here: www.cnn.com/2008/LIVING/personal/09/17/lkl.suze.orman/ and if you are lucky and search quickly enough, you may be able to see the entire interview elsewhere on tape or video sites online.

Suze Orman, AIG bailouts and why I listen when she speaks about this, Wall Street crash risks and more

When I cruised financial blogs and read comments from readers out there, I saw some criticism and skepticism about Suze Orman's take on the AIG bailout, a rescue she supported, noting this when speaking on the Larry King show (you can find the video link at the CNN site above). I tend to listen when Orman speaks because, as noted above, she was able to not only answer my financial questions but she saved me tons of money. As a result, I started saving even more aggressively for retirement and tweaked some health care plans.

AIG bailout, Suze Orman and takes on Lehman Brothers, stock market risks and the U.S. economy

When appearing on Larry King, Orman provided some clarification about why Lehman Brothers may have been allowed to fail but AIG was bailed out. My take was that AIG was rescued because of the economic global risks and Orman affirmed my take. Although she didn't come right out and accuse Wall Street of fraud (not that I noticed while watching the show) she did ask some very serious questions about why an AIG bailout was absolutely necessary - and the lack of regulation, actually stating that "nobody was overseeing and regulating" long before the most recent crisis occurred.

The most frightening words she uttered had to do with the uncertainty of what might come next....which financial institutions, banks or other major companies could go under next. When asked whether others could go under, Orman was quite clear about the very real risks still faced by our economy and other financial institutions out there. She even noted that "nothing was beyond the imagination at this point" (words which I confess had me running for the Prilosec to quell some nearly instant indigestion).

Suze Orman, AIG bailout and some tips about what people should do now

Like other people I know, I've had to fight the urge to withdraw money from the bank and hoard it somewhere else. But Orman made the very valid point that any cash people take out of the bank, stuff under mattresses or put anywhere that isn't fireproof or completely safe could be stolen or perhaps lost if a home was destroyed. We've had recent hurricanes. If those people had $20K hidden somewhere on their property or homes and didn't take it with them when they evacuated -and if the money was ruined - there wouldn't necessarily be insurance to cover it. For now, Suze Orman is not urging people to withdraw money from the bank. Money in the bank is insured. Care to guess about the insurance on money you stick in a drawer or in a basement? If it is stolen, you could well be looking at a total loss of your money and wondering why you didn't leave it in the bank.

Suze Orman and FDIC insurance information - are your bank savings protected and insured?

While fully disclosing any connections she has to the information, Orman has suggested people check their FDIC coverage by going to this site: www.fdic.gov/edie/ which allows people to check their bank accounts and see how much of their money is insured in case the bank closes or goes out of business. At the above site, users can see how much of their savings they could expect to get replaced. This can be very reassuring information and certainly worth double checking if you have any questions or fears about that. If you have too much money in a specific bank account (that in excess of what insurance would cover) you may want to consider reallocating your funds.

Suze Orman did not urge people to get into the market now

When asked point blank whether the timing was right for people to get into the market, Orman didn't urge people to do that. On the other hand, for those who had regular investment plans and a time frame of 10 or more years to ride out the current turmoil, she seemed to indicate that it'd be okay to continue with those plans, depending on how much money was at stake. We plan to continue contributing to our retirement plan, just as we have all along, in good times and bad. However, if it ever gets to the point where we have to choose between paying for groceries or the retirement plan, we may rethink that strategy.

An upcoming Suze Orman show will provide information on the Wall Street crisis and its impact

If you'd like to know more about Orman's take on the Wall Street crisis and how it might affect you, she'll air a special show on September 20 on CNBC, at 9 pm and midnight. Her shows do repeat from time to time so you may be able to catch this one again. I'm going to be watching it. When it comes to the economy, I try to read and watch everything I can, researching and pondering all sorts of views.

Sources
1. Personal experience as phone caller and having letter read on Suze Orman show
2. CNN online: Suze Orman: "Thank God They Bailed Out AIG" , Sept 17 (update): www.cnn.com/2008/LIVING/personal/09/17/lkl.suze.orman/
3. Clip from Larry King show (link at Cnn online, above)
4. Suze Orman website: www.suzeorman.com/index.cfm
5. FDIC Edie estimator: www.fdic.gov/edie/