By DOUG WILSON

Herald-Whig Senior Writer

Quincy native James Stewart got a first-hand look at the near panic on Wall Street the past few days.

"This is a crisis of confidence," Stewart said.

The Dow Jones Industrials were a roller coaster last week, plummeting nearly 800 points on Monday before rebounding slightly the next day. There was a 348-point drop on Thursday. Wall Street ended an intensely volatile week with the Dow Jones industrials falling 157 points and the major indexes all suffering big losses.

As a columnist at the Wall Street Journal and editor of Smart Money Magazine, Stewart was in the heart of the financial markets as the rescue plan was rejected on Monday, revamped and passed by the Senate on Wednesday, and ultimately passed by the House on Friday afternoon.

Stewart said this plan will help Main Street as much as Wall Street.

"Every college and university right now has to be extremely worried" because the tax-free municipal market shut down, Stewart said.

Those bonds help many schools keep up with day-to-day finances. Other terms of short-term financing used by many big companies were "basically dead" because large financial institutions were nervous about making loans.

That fear then spread to people who misunderstood the distinction between those banking/financial giants and their hometown banks.

"I talked with a banker in Ohio who had lines of people coming in to get cash out of their accounts," Stewart said.

In Quincy, the scene was a little less frantic, but one banker confirmed that a few customers had made big cash withdrawals. They may have worried that banks would fail as they did in 1930.

Bankers say conditions are very different today and hometown banks are not in danger.

The confusion may have arisen when people heard about takeovers or acquisitions of Washington Mutual, Lehmen Brothers, Wachovia and other huge banking and financial institutions. The difference is that small and conservative banks operate on deposits and assets, rather than borrowed money.

"We are very, very solid," said Art Greenbank, president and CEO of First Bankers Trust.

Greenbank added that Quincy has been insulated from some of the recent economic shocks because the local real estate market is still fairly strong and unemployment remains below state and national numbers.

Mike Mahair, president of State Street Bank, has been debunking rumors that local banks have stopped lending money. He said there are more than enough local deposits to cover loans.

"We don't rely on borrowed money. We're not dependent on Wall Street investors," Mahair said.

Greenbank said the biggest change for banks in the congressional bailout plan is the increase in insurance coverage for bank accounts of up to $250,000. The previous coverage of $100,000 through the Federal Deposit Insurance Corporation, probably was not adequate any more and was due for an increase.

Panic not surprising

A woman who lives in the senior housing units above the Quincy Senior and Family Resource Center was not surprised by the panic after the House rejected the first bailout plan on Monday. But she wasn't that worried about her own situation.

"I was a kid during the Depression," said the woman, who asked that her name not be used.

She has much of her retirement savings in certificates of deposit and other "cash-like" investments. Only a small part of her money is invested in the stock market. The price fluctuations of recent weeks confirmed her thoughts that stocks carry a greater risk than she is willing to accept.

She plans to keep the investments she has in stocks, waiting for the market to rise again. And she has no thoughts of making a run on the bank.

"Quite truthfully, I don't understand this whole mess. I don't think the average person does," she said.

What she did understand was that members of the U.S. House seemed to be listening more to uninformed constituents than to the experts who said a rescue plan was needed. She also was stunned by how badly the plan was presented to the public.

"It always amazes me when they have something to sell to the public, but they sell it all wrong. They came out with a bailout plan and it should have used some other word," she said.

Mitch Ellison, professor of finance and accounting at Quincy University, never had a doubt that the entire economy would suffer if financial markets were allowed to collapse.

"It will definitely affect Main Street," Ellison said before Friday's approval. "Nobody knows if this is like the Depression. It depends on how far the virus will go if they don't do something real soon."

Ellison said if U.S. markets fell dramatically, it would spread to world markets. That would hurt exports and lead to less demand for manufactured goods, which would hurt that most important of job sectors.

"I can see where if things went bad, within a year we're going to have 10 percent unemployment," Ellison said.

Once that type of job loss occurs, he warned it is very hard to bring jobs back.

TItan CEO says markets 'have to pay a price'

Morry Taylor, president and CEO of Titan International, agreed that global markets would "have to pay a price" if a market panic drives the nation and the world into a recession, or worse.

"Everybody's going to take a hit" if the markets sour, Taylor said.

Titan's wheel and tire business, however, would remain fairly stable, Taylor said. The company sells much of its product line for agricultural and mining uses. Even in a downturn, those two sectors would have to stay in operation.

The frantic reaction of some investors, troubled Taylor. He noted that "95 percent of mortgages are still being paid on time" and yet it is fears that subprime mortgages will be worthless that fueled the recent scare.

Jim Citro, branch manager of Stifel Nicolaus & amp; Co. in Quincy, said those mortgages have value, it's just that there are no bidders willing to buy them.

Citro understood the market reaction better than he did the political approach that led to Monday's vote against an earlier version of the rescue plan.

"There was so much posturing on both sides. Democrats and Republicans are playing politics with this" when it is too important to treat in a casual manner, Citro said.

He watched congressional debates about the market crisis where too many people were trying to assess blame, rather than fix the problem.

"If you drive up to an accident on the highway, the first thing you need to do is stabilize the patient. You don't have to cure what's wrong with them right there on the highway," Citro said.

Financial experts late in the week said the rescue plan won't be an immediate cure. But like Citro's fictional car crash victim, there is time for Congress and market regulators to work on more permanent treatments.

Citro said the main effect of the rescue plan will be to restore confidence. The evidence of that will come when local investors are calmed.

Stewart echoed that view.

"My advice? Stay calm," Stewart said.

In Quincy, as well as on Wall Street.

-- dwilson@whig.com/221-3372