The panic on Wall Street is rippling from the boardroom to the living room.

Corporations large and small have seen their borrowing costs spike, which could force them to cut back on investment and hiring -- the last thing Minnesota's economy, which is already losing jobs, needs.

Investors, meanwhile, are pondering whether to pull money out of mutual funds despite all advice that counsels just the opposite.

But logic sometimes crumbles in the wake of headlines about bankruptcies, massive bailouts and shotgun unions of some of the most storied names in high finance.

TrimTabs Financial Research, which tracks U.S. and global equity funds, said investors are pulling their money out of stocks and putting them into money market funds and cash.

On Wednesday, the migration from equity funds was $10.8 billion, up from $10.7 billion and $10.5 billion Tuesday and Monday respectively.

Those withdrawals represent only a small fraction of total assets invested, said TrimTabs equities analyst Vincent Delaud, but September looks to be the month with the largest withdrawal of funds this year.

"We're in a situation we haven't seen before," said Murray Frank, a finance professor at the University of Minnesota's Carlson School of Management. "Banks are scared to lend to banks. Investors are going to gold and T-bills because they want security," he said.

The London Interbank Offered Rate (LIBOR), a benchmark rate for the interest banks charge one another to borrow money, has been jumping up and down. And the market for commercial paper, short-term obligations sold to investors by banks and businesses to raise cash, is frozen.

"It's pretty serious," Frank said of the credit markets. "It's going to trickle down to the little guys. If you're a small manufacturer and you want to buy a couple of trucks or hire some more workers, the banks are going to say no or charge such a high interest rate that you say, 'I better not.'"

Mergers and acquisition volume at the Minneapolis law firm of Dorsey & Whitney slipped 26 percent between April and the end of June, as it became harder for companies to finance deals. In the second quarter of this year, Dorsey completed 66 deals, down from 89 deals a year earlier.

Despite the obvious angst, personal investment advisers say they are not being deluged with calls from panicky clients.

An Ameriprise spokesman said calls are up "somewhat" but declined to be more specific.

"I tell my clients to turn off the TV," said Charles Buck of Buck Financial Advisors in Woodbury. The endless string of dire financial reports on television has caused undue grief, he said. "I tell them if they have a plan, then follow it. If they don't have a plan, get one."

David Joy, chief market strategist for RiverSource Investments, owned by Ameriprise Financial, offers the same advice. He said now might even be a good buying opportunity in the market

"But buy good ones," Joy said.

That's getting ever tougher to discern, though. Today's credit crunch and investor meltdown was first thought limited to hyper-aggressive lenders that wrote mortgages for high-risk individuals. Since then, though, the problems have spread like a toxic plume across the global economy.

A volatile market takes a bigger toll on institutional investors than on individuals, who are less likely to manage their investments on an hourly or even daily basis.

As executive director of the State Investment Board, Howard Bicker oversees investments for the pension funds of Minnesota public employees and the state treasury. He said the funds hold some distressed stocks, such as American International Group, in its index funds.

But Bicker said the pension investments are not overly exposed to problem stocks. "Our money market funds are fine," he said.

Ordinarily, one might consider rebalancing the portfolio to minimize losses, Bicker added, "but everything has gone down pretty much equally."

"Obviously we're not happy with this. But we like to think of ourselves as long-term investors and you know, we've had bad markets before," Bicker said. "As long as you stick with your long-term philosophy, over the long run, hopefully, we should be just fine."

David Phelps • 612-673-7269 Dan Browning contributed to this report.