Discuss the Impact of 9/11 on New York Banks
The September 11th terrorist attacks caused the loss of many lives while also negatively affecting the economy of New York. While it is estimated that the attackers used around $ 450,000 to plan the attacks, the overall financial impact of the attacks on the economy were totalling to billions of dollars. This led to many policy changes in the banking system to avert future disruptions in the financial systems. This essay will examine the effects of the 9/11 attacks on the financial sector while also identifying mitigation efforts undertaken by financial institutions to counter the effects on the financial sector.
Effects of the 9/11 Attacks on the Financial Sector
The destroyed World Trade Centre resulted in an estimated loss of over $60 billion. The economic impact of the 9/11 attacks were profound with many banking and financial services being severely affected because of their concentration in lower Manhattan near the Trade Centre (Amadeo, 2019). With New York being one of the economic centres of the country, the attack on the Trade Centre resulted in damages in the overall national financial systems. For example, when the towers collapsed, they disabled an adjacent Verizon facility that was particularly responsible over 40% of communication lines in lower Manhattan. The loss of communications lasted for several days and negatively affected the overall processing of financial transactions eventually causing unprecedented losses that caused a brief disruption of liquidity for financial institutions (Chernick, 2005). Many financial institutions also had to spend a lot of money in relocations efforts to contingency locations where they could carry on with their activities.
The air and financial sector in New York were the biggest employers at the time and the attacks resulted in the loss of over 140,000 jobs (Amadeo, 2019). In the aftermath of the attack the market dropped by 7.1% during trading. Several stock exchange dealers in such as Cantor Fitzgerald were affected with loss of premises and massive loss of workforce, the company in particular lost over 700 employees in the attacks. Many financial institutions such as banks and the NYSE were closed in the aftermath of the 9/11 attacks causing many financial losses.
Mitigating the Effects of the 9/11 Attacks on the Financial Sector
After the attacks, many banks were in need of liquidity given that many people were accessing their accounts. While many financial institutions had backup sites following the Y2K scares, several banks were in crisis and it was up to the Federal Reserve Bank to mitigate the effects of the attacks that the banks faced. For example, where banks were unable to make outgoing payments and this created balances in their Federal Reserve accounts. There was a sharp increase in liquidity demand and it was up to the Federal Bank to provide support to the banks to avert the possibility of a financial meltdown. Through cooperation with global banks such as Bank of England, the Bank of Canada and the European Central Bank, private foreign banks were given funds to accommodate their liquidity needs. The President, George W. Bush, also instituted the Patriot Act aimed at controlling institutions such as banks and individuals who support terrorists and terrorist acts allowing institutions such as the FBI to go through financial records of suspected individuals without permission (Davis, 2016).
The attack on the Trade Centre resulted in the deaths of many people while also negatively affecting the financial sector. Many banks were in a crisis with no liquidity to facilitate their overall operations such as pay out to clients. These banks suffered losses in terms of premises and workforce. However, through the efforts of the Federal Bank, which continued operations after the attacks, the eventuality f an economic meltdown was averted.
Amadeo, K. (26 Jan, 2019). How the 9/11 Attacks Affect the Economy Today. The Balance.
Chernick, H. (Ed.). (2005). Resilient City: The Economic Impact 9/11. New York: Russell Sage Foundation.
Davis, S. J. (2016). An index of global economic policy uncertainty (No. w22740). National Bureau of Economic Research.
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