From Beacon Journal wire services

The biggest government intervention into the private financial markets in history has been a politically fraught process that will create a new slate of winners and losers on Wall Street.

Some key questions:

Q: Why does the government need to spend hundreds of billions to bail out financial companies?

A: Because we're all caught in the shakeout already, not just companies directly linked to troubled mortgages. A week ago, the credit crunch reached crisis levels: Banks were charging exorbitant fees to other banks seeking overnight loans; credit card companies like American Express were slashing credit limits for many typically creditworthy customers.

The failure of major financial companies could inflict more damage on consumers' credit cards, auto loans and home mortgages, said Patrick Kelly, assistant professor of finance at the University of South Florida. And that would be particularly painful for an economy already struggling through a housing meltdown and rising unemployment.

''It would definitely make mortgages much more difficult to get, which would mean the housing market would get even worse,'' Kelly said. ''I'm not saying instantaneously, but weeks, months, you can't know.''

Q: How much will this cost us?

A: The Treasury Department initially proposed a $700 billion fund to buy mortgage-related assets from troubled institutions. That price tag referred to only the maximum the government can hold of these assets at any time. The government could purchase far more than $700 billion of securities, as it buys and then sells assets. So, no one knows yet what the actual cost would be nor how much the government would recoup.

The Resolution Trust Corp., which bought up troubled savings and loans in the 1980s, was expected to cost the federal government up to $500 billion but wound up costing $125 billion.

The more the United States has to borrow, the greater the risk that the U.S. dollar will be devalued in foreign exchange.

Q: What else did regulators do?

A: They allowed Morgan Stanley and Goldman Sachs, the last two large independent investment banks in the country, to become bank holding companies. The two institutions were crippled by their inability to raise money as investors pulled back.

Commercial and investment banks both make loans, but one of the big differences is the way they bring in money.

Commercial banks have the benefit of depositors. The banks then turn around and lend that money at a higher interest rate. Investment banks, on the other hand, like Goldman Sachs and Morgan Stanley, do not have depositors — at least did not in the old way of doing things. Instead, they borrowed money by issuing short-term debt and selling shares.

By adding depositors, they gain access to a larger pool of money. But there are also drawbacks, namely a high level of regulation.

Q: Was this preventable?

A: Expect the blame game to play out over months, if not years.

Republican presidential candidate John McCain says he would fire Securities and Exchange Commission Chairman Christopher Cox.

Democratic candidate Barack Obama responded, ''Don't get rid of one guy. Get rid of this administration.''

Meanwhile, Sen. Chris Dodd, D-Conn, chairman of the Senate Banking Committee, told National Public Radio, ''This is a man-made, avoidable, preventable problem — and a lack of oversight and accountability was one of the problems.''

Q: Is my cash in money-market funds safe?

A: Through the 75-year-old Federal Deposit Insurance Corp. (FDIC), every checking account, savings account and certificate of deposit is insured by the federal government for up to $100,000 per person per institution, with some caveats.

The government agreed a week ago to extend the same protection, at least temporarily, to money-market mutual funds. But the Treasury Department is covering only current holdings in money market funds.

The American Bankers Association had warned regulators that covering all incoming deposits could spark a flight from bank accounts and Treasury debt to higher-paying money-market funds.

Q: Should I put my money in a mattress?

A: Experts say that's the wrong attitude. Bank accounts backed up by the FDIC are safer than a mattress. Besides, the volatility of late doesn't change the long-term projections for the stock market or the economy.

''Particularly for those in their 20s, 30s, 40s and even early 50s, don't let the volatility of the stock market scare you into derailing your long-term financial security,'' said Greg McBride, senior financial analyst at Bankrate.com. ''Over the long term, it's the allocation to stocks that's going to give you the growth needed to meet your long-range financial goals such as retirement.''