- The Washington Times - Wednesday, September 12, 2001

The massive terrorist attacks in New York and Washington yesterday will push the already sluggish U.S. economy into a recession and drag the world's economy down with it, analysts predict.
All U.S. financial markets will remain closed today in the wake of the attacks that wiped out the World Trade Center, once one of the nation's most enduring symbols of capitalism.
The Federal Reserve said it is prepared to pump extra money into the economy to prevent a recession, and analysts predict the central bank will slash interest rates to boost consumer spending. But those actions may not be enough to overcome the most devastating terrorist attack in U.S. history, according to analysts.
"This could not have come at a more vulnerable time economically," said Sung Won Sohn, chief economist for Wells Fargo Co., the nation's fourth-largest bank.
Consumer spending, which underpins the nation's economy, was declining before the attacks and could erode further, Mr. Sohn said. Foreign investors are also likely to lose confidence in the U.S. economy, he said.
Terrorists flew two hijacked commercial airliners into the World Trade Center yesterday morning, and the twin skyscrapers eventually collapsed.
Another hijacked airliner crashed into the Pentagon, and a fourth hijacked plane crashed in western Pennsylvania. Officials believe the attacks were part of a coordinated assault on the United States.
The attacks forced the Federal Aviation Administration to cancel all flights in the United States. The federal Securities and Exchange Commission also stopped trading on all U.S. financial markets.
The markets will remain closed today, the commission announced last night. The last time the New York Stock Exchange shut for more than a day was in 1933, during a "bank holiday" to prevent a rash of withdrawals during the Great Depression.
Analysts said it is not clear when the markets will reopen. The collapse of the World Trade Center — which housed the New York Mercantile Exchange and the headquarters of brokerage Morgan Stanley Dean Witter & Co. — probably resulted in the deaths of key financial industry leaders and the destruction of important computer equipment, analysts said.
Morgan Stanley was the largest tenant in the complex. It leased 1.19 million square feet on 25 floors, where it housed about 3,500 workers.
"Those people can't be replaced," said John A. Challenger, chief executive of the national work-force consulting firm Challenger, Gray and Christmas Inc.
The attacks also rattled international financial markets. The U.S. dollar had its biggest decline against Europe's currency in five months. Oil and bonds surged, which typically happens when investors see economic problems on the horizon.
Share prices in Tokyo fell 5 percent early today to trade around 17-year lows, with the Nikkei 225 index down 519.24 points to 9,773.71.
Business in the United States virtually ground to a halt yesterday, as nervous employers sent workers home and locked their doors.
The suspension of air traffic crippled operations at companies that rely on air transportation, such as package carriers FedEx Corp. and United Parcel Service. Evacuation of landmark buildings, such as the Sears Tower in Chicago, seriously disrupted activity at many firms.
Other companies, including Coca Cola Co. in Atlanta and Ford Motor Co. in Dearborn, Mich., canceled meetings and allowed workers to leave. Many banks and shopping malls shut down.
The Walt Disney Co. closed its amusement parks, but planned to reopen them today.
The widespread closings almost ensure that the nation's gross domestic product — the total value of all goods and services produced — will shrink during the third quarter, said Mark Zandi, chief economist for online research group Economy.com Inc.
"There is no economic good that comes out of this. It is just a question of how bad will it be," Mr. Zandi said.
Analysts worry most about the impact of the attacks on consumer spending, which accounts for two-thirds of economic activity in the U.S. Even before the attacks, signs of trouble were brewing as Americans grew more worried about their job security with each new wave of layoff announcements.
The government reported Friday that the unemployment rate shot up to 4.9 percent in August as job losses in manufacturing climbed higher than 1 million.
The overall economy grew by just 0.2 percent in the spring, the poorest showing in eight years. Before the terrorist attacks, many analysts had forecast a rebound to around 1.5 percent growth in the gross domestic product for the current quarter, helped by seven interest-rate cuts from the Fed and nearly $40 billion in tax-rebate money being mailed to Americans.
The Fed's promise to supply extra money to the banking system is an attempt to assure depositors that no bank will get caught without adequate resources to meet its normal operating needs.
It is similar to a pledge it issued on the morning after the October 1987 stock market crash. That action, only two months into Alan Greenspan's tenure as chairman, was credited with keeping the economy out of recession.
Some economists, such as Stephen S. Fuller, a public-policy professor at George Mason University in Fairfax, held out hope the attacks will inspire American consumers to rally around the economy.
"This is going to pump some money into the economy. People are going to spend with some purpose now," he said.
The attacks could also lift Washington's $30 billion-a-year government contracting industry, Mr. Fuller said.
The Defense Department is likely to ramp up production of military equipment, which would boost companies like Lockheed Martin Corp. in Bethesda, he said.
The Pentagon will also be in the market for new office space in Washington, Mr. Fuller said.

This article is based in part on wire service reports.

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