Marketplace: News Archives

Wednesday, September 12, 2001
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It's Wednesday, September 12, 2001. I'm David Brancaccio.

The search for survivors continues in New York's financial district and at the Department of Defense in Washington, as U.S. military officials are refusing to speculate on any early military response to the worst act of terrorism against the U.S. One defense department official is quoted as saying that "we have a very large hammer that can be brought to bear in a number of ways at any time." Authorities with many differing portfolios find themselves working toward a common goal: Restoring the public's confidence, be it confidence in national security, commercial aviation, or financial markets, even confidence in the economy at large. We begin our special coverage today with the markets, closed for the longest stretch since VJ Day 56 years ago. Stock market officials are now saying that stock trading would resume no later than Monday. We asked Marketplace's Bob Moon in New York to look into just what's been standing in the way of trading.

Moon: "Late today, New York Stock Exchange chairman Richard Grasso cited communications problems, power concerns, disrupted access and the continuing concern for rescuers and possible survivors."

Grasso: "It is in that backdrop that we don’t want to do anything precipitously."

Moon: "Foremost, officials say, 200-thousand phone lines to the New York Stock Exchange were damaged, and the local phone company, Verizon, doesn’t know how quickly they can be restored.

The communications infrastructure isn’t the only problem. The high number of casualties is causing staffing problems. But Forrester Research analyst Charles Rutstein says the financial DATA is backed up:"

Rutstein: "Materially, all of it is fully intact at this point. All indications are that the disaster recovery preparations that companies have been undertaking for the last decade or more are finally paying off."

Moon: "Outside Washington, Control Risks Group advises corporations on crisis management. The firm’s Larry Gurwin isn’t all that concerned about the chance of glitches that might erode investor confidence:"

Gurwin and Moon: "'I think the biggest single risk is not on the technical side - data being lost or computers not working. A much bigger risk is investors outside of the United States overreacting.’ ‘That suggests that there’s really not much they can do but flip the switch and cross their fingers.’ ‘Yes, on the technical side, yes. They should get systems working and tested and all that, but it might be even more important to emphasize that this country is not shut down.’

Moon: "And the quicker the market can send that message, Gurwin says, the better.

Brokers are already trying to get their investors ready. Advest’s Bill Cholawa says they’re telling people to sit tight and not panic:"

Cholawa: "In reality nobody really knows the effect of this, because this has never happened in history."

Moon: "Cholawa says he’s hearing that most of the major firms are saying they’re ready to go. But even just getting to Wall Street is a nightmare right now - not to mention the humanitarian concerns:"

Cholawa: "If it somehow affects what they’re trying to do down there - as far as rescuing people right now - by opening, we’d vote against for an opening. You know, right now you have to put people first, obviously."

Moon: "And while efforts to return Wall Street to normalcy continue, one analyst points out that for the stock market, normalcy lately has been a bear market.

In New York, I’m Bob Moon for Marketplace."

With the Air Force patrolling the skies and the National Guard on the streets, Washington struggled to get back to work today. Reminders of yesterday's events were everywhere ... and not just at the still smouldering Pentagon where half the building remained closed. The secretaries of State and Treasury made sure they were back in their offices today from overseas trips. So did Federal Reserve Board chairman Alan Greenspan.

Marketplace's John Dimsdale reports from Washington that the government's financial officials worked a second day at shoring up economic systems.

Dimsdale: "This morning, the Group of Seven industrial nations issued a commitment to ensure that -quote- this tragedy will not be compounded by disruption to the global economy - unquote. But disruptions to an already weak economy have already occurred, as business transactions, travel and deliveries have been delayed or canceled around the world. U.S. customs officials at seaports and border crossings remain on high alert. A U.S. Federal Reserve Board official reports that major bank borrowing from the government's central bank has been substantially higher than normal...although the loans have proceeded smoothly.

At mid-day, with Treasury Secretary Paul O'Neill still traveling back to the capital from Japan, Deputy Secretary Kenneth Dam read a confident, even defiant statement to reporters."

Dam: "With some exceptions, finance, commerce and banking systems have worked effectively and continuously. Acts of evil will not cripple the markets. Our financial system is and remains strong. The American economy is open for business."

Dimsdale: "Dam says the Treasury Department continues to conduct its normal business of processing Social Security checks, printing money and mailing out tax rebate checks.

Meanwhile, the President's spokesman, Ari Fleischer said yesterday's terrorist targets included the White House."

Fleischer: "The airplane that landed at the Pentagon was originally intended to hit the White House."

Dimsdale: "Fleischer would not confirm reports that the hijackers of the jetliner that crashed in Pennsylvania had intended to threaten Air Force One.

In Washington, I'm John Dimsdale for Marketplace."

Beard: "The devatstaing blow struck at the heart of American capitalism sent a wave a fear through the world's financial markets. With the giant temporarily felled, with the biggest stock exchange on the planet out of action, investors worried that mayhem would ensue in smaller markets...in Tokyo, Frankfurt and even London. That - says Chris Giles of the Financial Times prompted the European central bank and others to make billions of dollars available to the commercial banks:"

Giles: "Central banks around the world have been making sure there is no liquidity problem, there is no systemic risk that banks will fail because people are taking money out. And they've been pumping money into the banks. And there doies appear to be no risk at the moment. So financial markets are reasonably stable...at the moment."

Beard: "European stockmarkets actually rose today. The immediate danger of panic has been averted. But the global economy is certainly not out of trouble. Many analysts - like Elizabeth Bayer of Gerrards stockbrokers fear that Tuesday attacks could have dealt a fatal blow to the confidence of American consumers:"

Bayer: "The biggest thing is there are worries about American consumerism and will it hold? And that's what's under threat. With americans - and the way they are - they are highly nervous. They've never seen this in their own backyard as it were. It's got to their confidence and that will affect world markets."

Beard: "With Japan and Germany in the doldrums , US consumers have been keeping the American -and the global economy - out of recession. Chris Giles of the Financial Times says that if Americans stop shopping now as the result of a single dramatic event...it won't be first time:"

Giles: "In 1990 there were big falls in consumer confidence which co-incided with the Gulf war. The same thing happened in the late seventies which co-incided with the Iranian hostage crisis and in the mid seventies with the Yom Kippur war. These big events do affect consumer confidence."

Beard: "And those big events, like yesterday's attacks, occurred at a time when the US economy was already in a fragile condition. In London this is Stephen Beard for marketplace."

Travelers whose planes were diverted after yesterday’s attacks on the World Trade Center and the Pentagon got some good news today. Transportation secretary Norman Mineta authorized the airlines to take those passengers to their final destinations. But all other flights remain grounded until at least this evening and maybe longer. The flight cancellations and tight new security regulations are likely to have a long term impact on the airlines. Marketplace’s Laura Sydell reports.

Sydell: "There was an eerie quiet along the corridors of San Francisco International Airport today; ticket counters, restaurants, shops - all were closed and empty. Only a few airport staff could be seen at work. This is the second day that the government has closed the airways over the US to civilian traffic."

Nelson: "We’re taking things on a day by day basis."

Sydell: "Kristin Nelson, with Southwest Airlines could not say when they would resume operations. But when they do they will face a long list of new federal security regulations."

Nelson: "We’re working with the US government and we’re looking into all their security directives and looking to find the best way to accomplish them."

Sydell: "Among the new regulations: Airlines will now have to do a thorough search of all aircraft before passengers board, and there will no longer be curbside check-ins or any check ins through hotels. While all the airlines that spoke with Marketplace said they were ready to do what it takes to make sure their flights are safe, Brian Havel, a Professor of Law at DePau University and an expert on airline law, says behind the scenes they must be thinking about cost."

Havel: "Now the attention is going to turn from safety to what we would call security. And that’s an additional expense the airlines will have to share with the government. And clearly there will be some cost effects of that sharing."

Sydell: "Prior to the recent shut down in the wake of Tuesday’s attacks, airlines were already loosing business. Analysts were predicting an overall loss of 2-billion dollars for the industry in 2001. Now analysts like Kevin Murphy of Morgan Stanley are expecting the loss to hit 3-billion and to continue into 2002. Airlines will need to spend on safety he says to boost the consumer’s sense of security."

Murphy: "I think the real one two punch here isn’t the negative influence from the stand down that we’re currently seeing in the air transportation system. But really the lingering after effects of people being reticent to fly."

Sydell: "Meanwhile, other businesses that depend on the airways, like Fedex and UPS, say they are also experiencing slowdowns - but at least they can deliver their cargo using ground transportation. For now, most airlines say they are just trying to cope with this unprecedented situation.

I’m Laura Sydell for Marketplace."

Rundown

For our feature coverage of the World Trade Center disaster, please visit http://www.marketplace.org/features/unaccountable/.

Look-Ahead

Coming up on September 13: Coming up on Marketplace, companies are pitching in to help with relief, from counselling for their employees to humanitarian aid for New York and Washington.