Open and Operating
September 14, 2014 2:40 PM   Subscribe

Al-Qaeda deliberately targeted the 9/11 attacks at the backbone of the world's financial system in lower Manhattan, to cripple US and world banking. That totally didn't happen and, national emergency aside, the US's (and world's) financial systems kept operating as normal, with no runs on banks and the NYSE trading at normal volumes just a week later. With the destruction of the physical infrastructure of banking and telecommunications in lower Manhattan, Alan Greenspan stranded in Zurich, and no one having any idea what was going on, how did that happen? Within 41 minutes, Federal Reserve Vice Chairman Roger Ferguson issued a short statement on Fedwire that the Fed fund transfer system was fully operational and the Fed would remain open until "an orderly closing could be achieved." Within 3 hours, the Fed issued a short statement that "The Federal Reserve System is open and operating. The discount window is available to meet liquidity needs." The financial system, the Fed declared, would not fail.

Disaster planning for the possibility of Y2K a year before proved invaluable, ensuring that Fed staff knew how to secure their physical infrastructure and contact key personnel. With employees working around the clock across the country, the Fed stayed open to bank customers for 18-hour days, lent out $37 billion and $46 billion through the reserve window on 9/11 and 9/12 respectively (typical lending is $200 million) to keep liquidity in the system, organized an ad hoc system of truck shipping to keep paper checks flowing through the system when their usual airplanes were grounded, organized unusual deliveries of cash, hand-held banks through liquidity crises, worked their IT staff 24 hours a day for a solid week to reopen trading the next Monday, purchased treasury bonds limitlessly, worked with foreign central banks to ensure their national liquidity, and basically cleared by hand, pen, paper, and promises all temporary blockages in the system caused by catastrophic loss of people, technology, and communications.

The Daily Kos story in the first link likes to take shots at GWB and Greenspan and is a little breathless, but is a fascinating summary of the Fed's activities immediately following the 9/11 attacks.

Chicago Fed 2001 Annual Report (PDF; includes 2 pictures of 9/11 attacks); very interesting narrative of the day's financial events

New York Fed 2001 Annual Report (PDF); somewhat more dry accounting of NY's specific responses and the challenges to reopening trading

The Economic Effects of 9/11: A Retrospective Assessment (PDF); a report to Congress in 2002 that briefly summarizes (among many other things) the Fed's challenges and response

Roger Ferguson's 2003 speech on 9/11 at Vanderbilt

ABC News on Roger Ferguson

17-minute video from the Federal Reserve intended for high school students that discusses the Federal Reserve's response on 9/11 and explains many of the normal functions of the Fed. (Includes many images of 9/11 attacks.)
posted by Eyebrows McGee (42 comments total) 81 users marked this as a favorite
 
While opinions on the general basis of the US economy and central banking system may vary, one hopes we can all agree that having it fall due to an act of terrorism would have been a very Bad Thing. The best way to discourage terrorism is to prove that it does not achieve the intended ends, and insofar as the 9/11 attacks were targeted at the world banking and financial system, those at the Fed who kept the system operating were therefore fighting Al Qaeda on a direct level.

It is unfortunate that so many other parts of the US response to 9/11 played right into AQ's hands, but keeping the Fed running at all costs was the right thing to do.
posted by Kadin2048 at 3:07 PM on September 14, 2014 [38 favorites]


[One comment deleted; appreciate the frustration behind it, but let's not start this thread off with a general discussion of the bad US economy since 9/11. The post is on a much more specific topic. Thanks.]
posted by LobsterMitten (staff) at 3:11 PM on September 14, 2014 [6 favorites]


Reminds me of one of the final scenes in Fail-Safe:
"Now our immediate problem will be the joint one of fire control and excavation. Excavation not of the dead, the effort would be wasted there. But even though there are no irreplaceable government documents in the city, many of our largest corporations keep their records there. It will be necessary to rescue as many of those records as we can. Our economy depends on this."
posted by RobotVoodooPower at 3:12 PM on September 14, 2014 [2 favorites]


organized an ad hoc system of truck shipping to keep paper checks flowing through the system when their usual airplanes were grounded,

The reliance on paper in American banking boggles the mind (and frustrates this immigrant to no end). Having to switch delivery modes from air to ground for this anachronism is fascinating.
posted by srboisvert at 3:20 PM on September 14, 2014 [5 favorites]


worked their IT staff 24 hours a day for a solid week to reopen trading the next Monday

As someone whose worked an on-call-24/7 IT job and worked nearly 48 hour days before(and knows people who have it much, much worse. Some of whom work for major companies that really shouldn't be treating people this way), these people should have been paid like an entire years salary in bonuses for this, especially considering the importance of what they accomplished.

I can't think of a realistic scenario here in which they weren't criminally* under-compensated. Them, and a lot of others likely. Just doing your job falls flat when it's not like you're going to get a medal or anything.

What was accomplished here is extremely impressive, but i have a feeling that many cogs in the system were pretty much ground smooth in the process. And i can already hear the voices of the stockholm syndrome-y assholes in the various industries involved here going "Well, that's what you prepared for, if you didn't want to deal with it you shouldn't have taken the job".

*and jeeze, i don't mean this phrase literally

The reliance on paper in American banking boggles the mind (and frustrates this immigrant to no end). Having to switch delivery modes from air to ground for this anachronism is fascinating.

In the context of what happened here i think it makes a lot of sense. Assuming a direct attack on infrastructure, ECM, or cyberwarfare takes down the modern digital system you think they should be relying on... then what?

If the "analog" system has fallen into complete disuse, it would be hard to recover.

It's also worth noting that this was 2001. The majority of people didn't even have cell phones. Everyone had CRT monitors. Most non-government internet connections were dialup and a lot of the digital systems for this sort of thing we take for granted were in very early versions, or just not vetted yet. This was still the prime era of the bike courier when a lot of official government and court documents had to be hand delivered and faxing hadn't even been totally accepted yet.

It might have been barely over a decade ago, but for a lot of things it was a completely different era. Yea, things like ACH experienced huge growth during that time and had been going strong since the 80s... but it still doesn't much surprise me that a lot of this had to be handled over paper in 2001.
posted by emptythought at 3:24 PM on September 14, 2014 [18 favorites]


The Daily Kos story in the first link likes to take shots at GWB and Greenspan

By my count, there were only two shots against Bush and none against Greenspan, which to me shows remarkable restraint on the author's part. Otherwise, thanks for the link to what was a truly fascinating read.
posted by Tsuga at 3:26 PM on September 14, 2014 [2 favorites]


From my location on the opposite end of the country, working for an Engineering Company specializing in Environmental Remediation (in a non-Engineering capacity), the most common conversation was about whether we'd get to bid on part of the cleanup work. Except for a lot of breaks to check on the news via portable radios or TVs (more than via internet - the last big story for which that was true), life went on. I was one of the first who noted that in a complex of buildings that usually held a half-million workers, even the initial deathtoll estimates of 10K was incredibly GOOD. (Thanks to the terrorists hitting before everyone got to work, the delay between the plane crashes and the collapses and the truly heroic work of First Respondents... over 5% of those in the buildings when they collapsed had entered AFTER the planes hit) And watching the death toll drop, hour by hour over the next couple days, left me feeling a lot less "terrorized" than most people following the breathless 'news coverage'. I'm not being flippant - a defective fuse was all that kept me from being a victim of a Domestic Terrorist's bomb aimed at an IRS office eleven years earlier, so I just have a heavy dosage of personal perspective.

It was fairly obvious that America's Financial System was neither damaged not really threatened, just massively inconvenienced and damned pissed about it, but in control enough to manipulate those who felt "truly terrorized". And if there had been real damage to "the backbone of the world's financial system", the effects would have spread to places like Saudi Arabia where billionaire wahhabists who had been supporting Al Queda might have quickly decided to send someone over to chop Osama's head off.
posted by oneswellfoop at 3:36 PM on September 14, 2014 [9 favorites]


Another piece of the story is that most of the private financial trading institutions in NYC maintain dormant "disaster recovery" facilities in alternate locations in New Jersey or Fairfield County, CT. In the event of a catastrophic facilities loss, they pull-off the dust covers, throw the switch and bus whatever qualified people they have to the alternate location.
posted by ZenMasterThis at 3:39 PM on September 14, 2014 [2 favorites]


It's also worth noting that this was 2001. The majority of people didn't even have cell phones. Everyone had CRT monitors. Most non-government internet connections were dialup and a lot of the digital systems for this sort of thing we take for granted were in very early versions, or just not vetted yet. This was still the prime era of the bike courier when a lot of official government and court documents had to be hand delivered and faxing hadn't even been totally accepted yet.

Per Wikipedia, Napster peaked February 2001. There were plenty of people not on dial-up (and not living in university dorms). You might be right that a strict majority of home internet connections were dial-up (digital divide and all that--there are lots more people on dial-up or without internet at home now than you'd assume), but I remember hearing about Napster at school and realising it was useless to me because we had dial-up.
posted by hoyland at 3:41 PM on September 14, 2014


With banks beginning to run low and one bank needing as much as $1.2M right away, Chicago Fed employees found “alternate methods” of getting the currency delivered within two hours.

Awww man, way to tease us with that anecdote! Were Fed employees were driving around with boxes of cash in their trunks?
posted by JoeZydeco at 3:43 PM on September 14, 2014 [1 favorite]


I'm still curious about this:
Greenspan’s plane was one of the lucky ones. Instead of being grounded in Iceland, Greenland or Newfoundland as had so many other international flights, Greenspan’s flight was able to return to Zurich.
It isn't like they couldn't have gotten a special military flight to any of those other places, and I don't get why Zurich was luckier than Iceland.
posted by jeather at 3:56 PM on September 14, 2014 [1 favorite]


It isn't like they couldn't have gotten a special military flight to any of those other places, and I don't get why Zurich was luckier than Iceland

Perhaps Greenspan could travel by secure ground transport from Zurich to an American military base (say, Frankfurt), but that would have been a lot harder from Iceland.
posted by JoeZydeco at 4:03 PM on September 14, 2014


Zurich may have been luckier since it is a hub of world finance which Iceland, bless them, is not.
posted by maryr at 4:05 PM on September 14, 2014 [5 favorites]


I don't get why Zurich was luckier than Iceland.

Zürich is a major financial centre (2nd in Europe, 5th globally on the same ranking where Reykjavik is currently #82 out of 83). Also within driving distance to large chunks of Western Europe (e.g. 4 hours to Frankfurt).
posted by effbot at 4:09 PM on September 14, 2014 [3 favorites]


The reliance on paper in American banking boggles the mind (and frustrates this immigrant to no end). Having to switch delivery modes from air to ground for this anachronism is fascinating.
I imagine things would be far worse if we ever had another Carrington Event.
posted by CheeseDigestsAll at 4:21 PM on September 14, 2014 [4 favorites]


Yeah. Being stuck in Zurich means that he's in the same city as many of his peers, and at worst a couple hours' train ride away from many more. If he was in Iceland he would be physically isolated from everybody and dependent on network and phone lines holding up.
posted by ardgedee at 4:23 PM on September 14, 2014


I imagine things will be far worse when we have another Carrington Event.

FTFY.
posted by happyroach at 4:29 PM on September 14, 2014 [5 favorites]


> It's also worth noting that this was 2001. The majority of people didn't even have cell phones. Everyone had CRT monitors. Most non-government internet connections were dialup and a lot of the digital systems for this sort of thing we take for granted were in very early versions, or just not vetted yet.

That overstates things a bit. Laptops (LED displays!) had already evolved into physical forms similar to todays (touchpad or trackball between two wrist rests, keyboard behind that, etc.). They were expensive and underpowered compared to desktops, but they weren't that weak; pretty nearly any white collar worker who wasn't using Photoshop or running huge compiles could rely on one, and if you were a serious road warrior you could trick one out to get close to desktop performance. Although the screen size would still be an issue.

Wi-fi was also already available at the consumer level, and although DSL was the best broadband you could get at the time it was a hell of a lot faster than dialup. In my job I got to talk with a lot of clients at other companies, large and small, and even then it was really the businesses that begrudged every small expense that insisted on using dialup or rationing in-office network usage. I had DSL in my apartment in 2001, and I was definitely not an overpaid dotcom knowledge worker.
posted by ardgedee at 4:33 PM on September 14, 2014 [5 favorites]


heckuva job, fergie.
posted by ennui.bz at 4:35 PM on September 14, 2014 [2 favorites]


They had to save the American economy, or there would be nothing left to loot. Nobody's going to destroy our economy but us.

Mission accomplished.
posted by charlie don't surf at 4:39 PM on September 14, 2014 [4 favorites]


Also in 2001, the majority of people didn't have cell phones, but they were unremarkably common among white collar workers. Cell phone popularity was rising, Nokia's 51xx and 61xx models were already a couple years old in the US and selling like hotcakes, while pagers were already far into their declining days. It was considerably more unusual to find somebody who'd cancelled their landline to depend exclusively on their mobiles, but it seemed like an obvious next step even then.
posted by ardgedee at 4:40 PM on September 14, 2014 [2 favorites]


It's also worth noting that this was 2001. The majority of people didn't even have cell phones. Everyone had CRT monitors. Most non-government internet connections were dialup and a lot of the digital systems for this sort of thing we take for granted were in very early versions, or just not vetted yet.

I feel like this isn't quite right-- I learned about the attacks from my laptop in ninth grade Latin class, and while we had to use the little antennae cards, it was definitely a wireless system. My parents were in downtown DC, close to the White House, and so our cell phones didn't work for a while, but that was a network and capacity issue. Granted, having mandatory laptops was unusual for 2001 in a high school, but certainly they weren't cutting edge. I also remember tracking the drop of the dollar against European currencies in the days following from the cafeteria (weird hobby?) so I definitely appreciate knowing more about this angle of the story.
posted by jetlagaddict at 4:44 PM on September 14, 2014 [1 favorite]


Laptops (LED displays!) had already evolved into physical forms similar to todays (touchpad or trackball between two wrist rests, keyboard behind that, etc.). They were expensive and underpowered compared to desktops, but they weren't that weak; pretty nearly any white collar worker who wasn't using Photoshop or running huge compiles could rely on one, and if you were a serious road warrior you could trick one out to get close to desktop performance. Although the screen size would still be an issue.

oh fer chrissakes, it wasn't that long ago. I was on my 3rd or 4th completely usable laptop by that time, in 2002 I bought one from Overstock.com for $400.
posted by quonsar II: smock fishpants and the temple of foon at 4:46 PM on September 14, 2014 [4 favorites]




Great job with the FPP. I feel like that Shiba dog: Wow. Such research. Much inform.
posted by Joe in Australia at 4:56 PM on September 14, 2014 [8 favorites]


A man with a cell phone called his wife from one of the hijacked planes, didn't he?
posted by maryr at 5:04 PM on September 14, 2014 [3 favorites]


The financial system, the Fed declared, would not fail.

Irrefutable proof that banksters are more dangerous to us than terrorists.
posted by Purposeful Grimace at 5:10 PM on September 14, 2014 [2 favorites]


I don't understand what cell phones and wi-fi and broadband have to do with Americans' (continued) reliance on paper checks. Does everyone need gigabit fiber for the banks to implement a sane electronic fund transfer system?
posted by bradf at 5:11 PM on September 14, 2014 [1 favorite]


To me it was amazing how they managed to 1) keep the Fed operating with such major infrastructure damage to the heart of the financial district; 2) keep banks liquid and operating during public (non-bank) panic and a liquidity crisis; 3) bridge infrastructure gaps until they could be repaired (like trucks full o' checks); and 4) feverishly repair physical infrastructure, all at the same time, while coping with hundreds of deaths of financial services employees, in a highly interconnected and massively complex system. It literally never occurred to me before reading the Daily Kos article that "Oh, hey, if this had all gone a little differently, the banking system could have choked and been locked up for a week -- or worse." Instead, by the time anyone (but bankers) thought to wonder, "OH MY GOD, WHAT ABOUT THE BANKS? Can I get money?" the system was all, "Yep, no problem, we've got it handled." I was outside NYC and DC, and I remember a little bit of local discussion about ATMs possibly being low on cash, but nobody questioned whether credit cards would work or they'd get paid or their rent check would clear. Which, when you stop to think about it, is truly amazing.

Also just the sheer magnitude of the banks' illiquidity, requiring $37B and $46B instead of their usual $200 million overnight. That's gigantic. Imagine if banks hadn't been able to get funds to businesses to issue mid-month paychecks. Even if the banking system as a whole is robust, it'd be pretty shitty if your corner of it failed and you didn't get paid.

The background infrastructure of the modern world functions so seamlessly that it's never occurred to me to think about how many layers of functioning underlay me writing my water company a check, and how much work it takes to keep those systems going.
posted by Eyebrows McGee at 5:16 PM on September 14, 2014 [20 favorites]


I don't understand what cell phones and wi-fi and broadband have to do with Americans' (continued) reliance on paper checks. Does everyone need gigabit fiber for the banks to implement a sane electronic fund transfer system?

A lot of money is made on the time it takes to move the checks from banks to the processing centers (strategically located in the geographic center of the country).

The money is the bank's to play with until the check is cleared.
posted by Mei's lost sandal at 5:28 PM on September 14, 2014 [4 favorites]


"organized unusual deliveries of cash"

If this was a shitty TV show, the attacks would simply have been a cover for moving large sums of cash untraced.

Because it's shittier than that, it was actually a convenient cover for banks and security wonks to douche the same, only domestically.
posted by clvrmnky at 5:46 PM on September 14, 2014


The reliance on paper in American banking boggles the mind (and frustrates this immigrant to no end).

In response to the problems that 9/11 caused with check clearing, congress passes a law that allowed paper checks to get processed electronically. Before then, only the physical paper check was legally negotiable. Up to that point, shipping the paper checks around worked well enough and, you know, we needed our legislature to get around to doing something about it.

Today if you write a paper check to someone it get's converted into an "image replacement document" and cleared electronically.
posted by VTX at 6:36 PM on September 14, 2014 [3 favorites]


The ability to deposit a check by taking a picture of it with your smartphone is, strangely enough, a knock-on effect of September 11th. The law that allows this is called Check 21.

It does have tradeoffs, though. By removing paper from the system it probably makes it a lot more vulnerable to digital-domain threats, even if does make it more resilient to physical ones. Eliminating a system that had just proved that it could survive a major terrorist attack and replacing it with one that might fail in a variety of interesting and novel ways is not necessarily an across-the-board improvement.

But being able to deposit checks from my phone is nice.
posted by Kadin2048 at 7:25 PM on September 14, 2014 [8 favorites]


Yup, I knew a guy from working at the local airport who got a job flying pay checks in a little twin engine Aztec up and down the east coast. We'd say hi over the radio if I was working mornings on days he was doing his runs. Probably going to be one of this century's "buggy whip salesman" professions eventually.
posted by backseatpilot at 7:25 PM on September 14, 2014


I remember reading an article which discussed a non-obvious potential side effect of when the Big One hits SF and/or LA. Given that the Big One will pretty much take out all public utilities for a period of weeks, it means banks in one or the other (or both) cities as well as insurance companies and a lot else would go offline.

The author speculated that it could crash the world economic system, but I wonder if that's really true.
posted by Chocolate Pickle at 7:43 PM on September 14, 2014


banks in one or the other (or both) cities as well as insurance companies and a lot else would go offline

I would guess that most of these companies have pretty solid disaster recovery plans. I used to work at a bank in an earthquake zone, and it had two data centers, both in different parts of the world from one another and from HQ.
posted by Blue Jello Elf at 7:53 PM on September 14, 2014 [2 favorites]


I think the financial system is modular enough that California could fall into the Pacific and the banks would still open up the next day. The stock market would likely take a hammering, but it would still function.
posted by arcticseal at 7:54 PM on September 14, 2014 [2 favorites]


Wow, i guess i overshot the 2001 tech thing a bit maybe? I was 11. 99-02 or so kinda blur together in my head. Shit moved fast then. Stand corrected, i guess.

And yea, i was on my second worthwhile laptop then... but it wasn't like a ton of people had them. Ditto with cell phones and broadband. I guess i mostly just remember how people would be relatively surprised my parents had that stuff.

I kind of intentionally didn't bring up laptops. Because yea i know, they were around.

I also remember orinoco gold wireless cards from around then, heh. And PCMCIA wireless cards in general. Almost nowhere had wifi, it wasn't like today where you can literally walk a couple blocks down the street in an area of town with businesses and hop on free wifi(i've known people who've used ipod touches or cheap androids instead of phones entirely, this way). You had to know specifically where to go to get it. A lot of coffee shops DIDN'T have it, the majority even. Starbucks didn't get wifi for a couple more years.

I definitely feel like 2001 was right in the middle of that transition from that stuff being totally normal from it being something that existed, but only people with a good amount of money or who required it for work had it. I definitely remember that even a fairly basic cellphone cost like as much as an iphone does now, and a $400 laptop as mentioned above would be awful(whereas now that can get you something solidly midrange). It would be like a $120 black friday laptop now.

And seriously, i still say, around then i knew a bunch of middle class+ families many of whom had parents who worked in tech-y fields. I think i knew maybe two who had broadband. EVERYONE had dialup.

I feel like by being on mefi a lot, you and your social circle probably self-select a bit for groups of people where you and most of your friends had this stuff right when it came out. Things were just a hell of a lot less connected back then, and tech just wasn't as evolved. And the searching i did as, and before i made that first comment seemed to back that up. That's why i focused mostly on ACH and looked mostly at stuff about how the electronic financial system(which i know some stuff about, i work on card systems and deal with PCI compliance and all that) was at the time. None of the check flying surprised me.

A lot of money is made on the time it takes to move the checks from banks to the processing centers (strategically located in the geographic center of the country).

The money is the bank's to play with until the check is cleared.


I can't believe the number of people who act like this is a weird conspiracy theory. It doesn't take 3 days to transfer money from paypal to your bank account because "ACH is ancient". Square can do that shit within 24 hours or less most of the time. All of this is intentional, and all the middlemen sit on it to collect interest.
posted by emptythought at 9:39 PM on September 14, 2014


In response to the problems that 9/11 caused with check clearing, congress passes a law that allowed paper checks to get processed electronically.

That sort of not really a solution workaround seems like it could be a metaphor for the US political system as a whole: obsolete and inefficient but we'll patch it just enough to barely keep it working.

Cheques were something old people used and then only rarely even in 2001; in fact the Eurocheque disappeared by 2002.
posted by MartinWisse at 11:10 PM on September 14, 2014 [2 favorites]


I think the most amazing thing about the story is the role Y2K played. Essentially, the institutions involved were a little over 20 months out from the biggest emergency preparedness drill they had likely ever done – and it paid dividends. Which probably means that an attack in, say, 1998 would have been ten times as disastrous.

(Not that I approve of the role of banking in our modern society, but having the system simply disappear would produce chaos, not a better alternative to the banks.)
posted by graymouser at 4:32 AM on September 15, 2014 [7 favorites]


Irrefutable proof that banksters are more dangerous to us than terrorists.

That scraping sound you're hearing? That's the sound of Marxists' teeth grinding as they read the FPP.
posted by happyroach at 10:39 AM on September 15, 2014


in other news:
  • Crises: They let it happen - "THE argument that American officials lacked the capability or authority to save Lehman Brothers—and, potentially, to spare the world the most wrenching financial crisis since the 1930s—never really withstood close scrutiny."
  • Revisiting the Lehman Brothers Bailout That Never Was - "New accounts of events in 2008 as the New York Fed assessed the bank's eligibility for rescue from bankruptcy have cast the firm's collapse in a new light."
  • Hank Paulson's Telling Admission - "Paulson didn't say right out that the banks were untouchable, but that was clearly what he meant."
  • Bernanke, Paulson and Geithner Face Grilling Over AIG Bailout - "Former Fed Chairman Ben Bernanke and other architects of the U.S. government's response to the financial crisis are likely to get a tough grilling this week from an attorney representing shareholders challenging the government's AIG bailout."
also btw... posted by kliuless at 9:22 AM on October 8, 2014


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