Financial Impact: New York/Washington Bombings
dwalters at igc.org
Wed Sep 12 11:24:33 MDT 2001
Explosions Cripple American Economy
1940 GMT, 010911
The attacks in New York City and Washington, D.C., targeted obvious symbols
of American prestige and power: the World Trade Center and the Pentagon. The
attackers achieved a crippling blow against America's economic
infrastructure as well.
New York City is one of the richest cities on the globe, independently
raking in more annually than all but the world's most advanced states. In
1998, the city's budget exceeded that of some major countries, including
But New York is more than just a wealthy city of 8 million people. It is the
financial capital of the world's largest economy. As the significance of
what happened in New York sank in across the country, America's smaller
exchanges closed down one by one. But it is the New York Stock Exchange that
moves global financial events.
Minutes after the attacks, authorities shut down the entire island of
Manhattan, virtually sealing it off from the rest of the world. The NYSE,
located a mere half mile from the collapsed World Trade Center, has
suspended operations until further notice. That action alone set off
secondary tremors in stock exchanges the world over. By 11 a.m. CST, all
active, major global exchanges were registering sharp losses.
Even with the ongoing global slowdown, America's market capitalization is
larger than its massive $10 trillion GDP and more than all other financial
centers combined. A fair portion of the value of that capitalization is sure
to evaporate over the next few days.
The seemingly invincible dollar has lost its footing as well. After
regularly gaining against major currencies for the past few years, the
dollar dropped 1.8 percent against the euro and 1.5 percent against the yen.
Since most of the world's $1.1 trillion in daily foreign exchange trades
take place in New York - and those markets are closed - this drop is a mere
glimpse of what is to come.
Foreign financial markets are already trembling. The Paris exchange
immediately plummeted 7.4 percent, the London exchange 5.7 percent and the
Frankfurt exchange 8.5 percent. Oil traders are betting that the United
States will seek retribution against a Middle Eastern target; that has
pushed crude oil prices up to a nine-month high.
The infrastructure that supports high-powered business is also either
crippled or locked down. Officials at the Sears Tower in Chicago, keenly
aware the tower is the country's tallest building, have ordered an
evacuation. And the offices in the 110-story World Trade Center were the
backbone of many financial powerhouses such as Morgan Stanley Dean Witter,
China International Trust, Yamatane Securities America and Farmers Union
Control Exchange. New York City plays host to more multinational corporation
headquarters than any other city in the world.
As the financial disaster ripples outward, the insurance industry will be in
for a very rough time. For instance, Westfield America Inc. signed a
99-year, $3.2 billion lease on the now nonexistent World Trade Center
Building only last month. This is merely one example of the size of the
insurance claims that will be filed in coming weeks. Staggering claims could
be filed by the companies that were tenants of the World Trade Center.
Meanwhile, liability insurance for canceled and crashed airline flights will
be paid out, and life insurance policies for the uncounted dead also must be
The damage at the World Trade Center may be the most expensive man-made
insured event ever, Reuters reported.
The direct impact on American companies cannot be estimated until the
exchanges reopen, but European insurers are already rattled. An index that
follows large European insurance companies fell more than 10 percent within
an hour of the World Trade Center collapse. The carnage to come in American
markets will be harrowing.
Beyond New York, the Federal Aviation Administration has shut down the
country's entire commercial air network, canceling all civilian flights.
With an average daily capacity of 55,000 flights, the daily loss to the
industry ranks in the hundreds of millions.
Industry confidence is sure to plummet to historic lows. Preliminary reports
indicated that U.S. military fighters shot down another suspected hijacked
passenger plan outside of Pittsburgh. Though the report remains unconfirmed,
the chance -- however remote -- of the government shooting down civilian
passengers would certainly put a damper on an airline industry only recently
recovered from a wave of mergers and price wars.
Related industries, such as tourism and shipping, will suffer equally.
Again, European markets are leading the fall. British Airways and Hilton
Group both shed more than one-fifth of their stock value within hours of the
Life will not return to "normal" soon for the airline industry. More than 2
million passengers travel through U.S. airspace daily, but the FAA is often
accused of designing security regulations more to produce a sense of
security than actual safety. A complete security overhaul must be conducted
before the air routes can be safely reopened. Even a partial fix will take
days, if not weeks.
Back in New York, the cordon around the shattered remnants of the World
Trade Center -- until this morning the nexus of the financial world -- will
remain for days as rescue workers set to the grim task of picking through
the rubble. The economic damage -- the full extent of which will not be
discerned for months -- will be equally grim.
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