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The CEO of Raymond James Financial, Tom James, was the closing speaker at a conference I recently attended. One of the points he passionately made from the podium was, as he said, a revolutionary idea — lend money to people who are able to pay it back.

This speech was made following the failure of IndyMac Bancorp based in Pasadena, California and the troubles at Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). A federal government guarantee will provide the mortgage giants with the liquidity they need for normal operation, a move designed to relieve investor concern.

The failure of IndyMac Bank — the third largest financial institution in U.S. history to fail and the largest in two decades — wasn’t a surprise to some. Its main business was built on mortgages made to borrowers with poor credit records, and when the secondary market for these subprime mortgages dried up, so did the bank’s money supply.

As a regulated bank, depositor accounts worth up to $100,000 (and IRA accounts up to $250,000) are insured by the Federal Deposit Insurance Corporation (FDIC, an independent agency established by Congress in 1933), which began running IndyMac Federal Bank on Monday morning, July 7, 2008.

The troubles at Fannie Mae and Freddie Mac, which together hold or back more than $5 trillion in mortgage debt — about half the nation’s total — were much different. Together, they have very little subprime mortgage debt, but as mortgage holders defaulted over the past year, their reserve cash dwindled. They’d been forced to raise new cash during these tough economic times. Originally government-created agencies, they are now owned by shareholders. Their shares have plunged in value over the past weeks as worries mounted.

Analysts, including Raymond James’ Chief Investment Strategist Jeff Saut, say the system will hold together and cannot be allowed to fail because the global implications of a U.S. failure of this magnitude would be enormous. Rather than a real financial meltdown, the Fannie Mae/Freddie Mac saga may be more a crisis of confidence.

In the midst of all this concern, you may wonder about the financial protection of your own investments handled through your broker. Since I cannot speak for other firms I will relay what is provided by Raymond James.

Each account custodied by Raymond James and Associates is protected for the net equity of the client’s securities and cash positions. Raymond James and Associates is a member of the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $100,000 for claims for cash). An explanatory brochure is available upon request or at www.sipc.org or by calling 202-371-8300.

We then provide additional protection (excess SIPC) through Customer Asset Protection Company, a licensed Vermont insurer rated A+ by Standard and Poor’s. Account protection applies when a SIPC-member firm fails financially and is unable to meet obligations to securities clients, but it does not protect against market fluctuations. Accounts held at Raymond James Bank, FSB, as noted above, are insured by the FDIC.

Everyone will be paying very close attention to the market in the upcoming weeks to gauge its considered reaction to the federal guarantees for the mortgage agencies and concerns that other banks could fail. This is certainly a trying time to be an investor, but, historically, such times have been favorable to those who diversified their holdings and set their course for the far horizon. If you have questions or concerns, please don’t hesitate to call me.

*Raymond James and Associates, Inc. is affiliated with Raymond James Bank, FSB, member FDIC. Unless otherwise specified, products purchased from or held at Raymond James and Associates are not insured by the FDIC, are not deposits or other obligations of Raymond James Bank, FSB, are not guaranteed by Raymond James Bank, FSB and are subject to investment risks including the possible loss of principal invested.

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Darcie Guerin is a financial adviser and branch manager at Raymond James & Associates Inc. at 606 Bald Eagle Drive, suite 401, Marco Island. Contact her at Darcie.Guerin@raymondjames.com, 389-1041 or toll-free (866) 343-0882.