- The Washington Times - Friday, September 14, 2001

Investors fled to safe-haven Treasury securities yesterday, the first day of New York trading since the terrorist attacks, sending some short-term interest rates to their lowest levels in 47 years.
The flight into Treasuries, and the steady performance of the dollar, showed that confidence in the United States, its government and its economy has only increased in the wake of the attacks, despite fears of a recession, as America remains the bulwark of the world economy.
The stock markets were closed and regulators announced they would remain closed until Monday in the longest trading interruption since the Great Depression.
Also sparking the dramatic drop in rates was news of a jump in jobless claims and a slump in consumer confidence to the lowest level in 81/2 years during the first week of September, suggesting that the U.S. economy was edging toward recession even before the attacks. Investors widely expect the Federal Reserve to move aggressively in coming days to stem the economic slide.
The Fed intervened in the markets again yesterday to soothe frayed nerves and smooth the functioning of bond and currency trading that has been partially disabled by the flattening of the World Trade Center, where the trading desks of major investment houses were located. To ensure that investors and businesses in Europe have the dollars they need, the Fed injected another $50 billion into the system in an exchange swap with the European Central Bank.
While trading in the bond and currency markets was transacted by computer in dispersed offices around the country, regulators decided to keep the stock markets, which are mostly housed on Wall Street, closed in deference to the efforts to dig out the bodies of thousands of financial workers entombed only blocks from the bourses and out of concern that downed communications, electrical and storage systems would prevent the proper execution of stock trades.
"No one from the financial community would support resumption of trading over the quest to bring out a full and complete recovery of those who are still with us that are trapped in the wreckage," said Richard A. Grasso, chairman of the New York Stock Exchange. The American Stock Exchange is located only yards from the site of the attacks and was severely damaged by the collapse of the trade complex.
Major investment houses such as Morgan Stanley Dean Witter and Merrill Lynch were hit hard by the terrorists. Thousands of Morgan Stanley employees worked in the trade center, and many were still missing yesterday. Merrill Lynch has a football field-sized trading floor in the nearby World Financial Center, which authorities evacuated after the collapse of the trade center destabilized the building's foundations.
The Fed's vital New York reserve bank, which is the one that interacts with the markets and is most closely linked to the economy, is only blocks from the devastation, and many operations had to be moved to New Jersey to ensure the continued functioning of the financial system.
Richard Berner, economist with Morgan Stanley, was in the World Trade Center presiding over a meeting of the National Association of Business Economists when airliners slammed into the twin towers. He escaped just in time before the buildings collapsed and trapped thousands of other financial workers and rescue personnel.
Like most economists, Mr. Berner believes that the attacks have dealt another sharp blow to confidence and may cause consumers to retreat — possibly plunging the economy into recession.
"Consumers can react swiftly and negatively to heightened uncertainty, as was the case in the Persian Gulf crisis," said Gail Fosler, chief economist of the Conference Board. She said the economy is not likely to recover until next year, given the weakness it showed heading into the attack, but developments in the next few weeks will be critical. If consumers see no real change in gas prices, employment and other economic factors that touch their lives, the impact will be short-lived, she said.
The Fed's accommodating moves and a $20 billion rescue package approved by Congress should help to offset the impact of the attacks on the economy, she said.
"The American economy was a specific target of the attacks," said Thomas J. Donohue, president of the U.S. Chamber of Commerce. But he said the terrorists succeeded only in galvanizing businesses and consumers to work harder and stymie the attackers' attempt to bring the system down.

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