The Financial World Gets Rocked – Are Terrorists Our Scapegoats?

by Jacqueline Cervantes

With the collapse of the towers on September 11, 2001, a wave of terror swept over lower Manhattan as thousands began running up West Broadway, one of the main arteries that leads north out of the core tip of the island. Many were hurt, bloody and in shock. America was under siege.

With that said, the impact of the terror attacks on the U.S. has been far reaching and has touched all Americans in some way. Life as we knew it prior to the attacks was changed forever on that morning in profound ways that meant losses for nearly everyone, with the exception of those standing to profit from war. And now, in the summer of 2002, nearly a year later, the U.S. economy continues to be in a downward spiral.

Many companies wasted no time in unveiling expectations of slowing sales and a redundancy of workers. Thousands of employees faced torturous layoffs including myself along with two family members. It is for that reason coupled with my interest in the global economy and markets that I was compelled to research the stock market activity prior, during and after the attacks. As a financial advisor and a participant in the financial sector for over five years, I also found it vital to address the frenetic addiction of capitalization of both traders and terrorists on the morning of 9/11. I will attempt to answer if individuals within the financial industry are as fanatic about making money as terrorists are about their mass movements. Are they both true believers? I will then evidence these claims through interviews and relevant economic data. I will continue by following terrorists’ tainted money as it makes its way through U.S. banks and financial institutions because of the governments inability to ensure that its sanctions are being followed. Later, I will propose remedies for these claims.

The attacks of 9/11 were a great shock to the stock market. That morning financial markets were hit around the globe as investors digested the implications of the attacks. An already shaky consumer confidence, which is largely responsible for keeping the world economy afloat, was even less confident and many analysts predicted that these attacks would push the U.S. and the world into a generalized recession. Additionally, the loss of a few days of financial activity was devastating. Some analysts have even likened it to the straw that broke the camel's back.

When looking at the effects on specific stock exchanges, it is easier to understand both their initial fall and their subsequent rise if we consider some basic economic background. Understanding the effects of terrorism on the economy is complicated for at least three reasons. The first of these is that it requires us to look at several different sectors of the economy including household economies, government spending, consumer confidence, and overall supply and demand. The second reason is that different economic models weigh elements of society differently in trying to determine which elements are most responsible for a particular economic effect. They also differ dramatically not only in what they think is ailing an economy but also what should be done to alleviate the problem. Conservative economists look at a problem and they hear the voice of reasons to cut taxes. Progressive economists look at the same problem and hear the same voice of reason to increase government spending. Whether one believes the conservative models or the progressive ones has less to do with the mathematics of either one and a great deal to do with one's own basic political beliefs.

The following is a graph of the consumer confidence index and is based on a monthly survey of some 5,000 U.S. households. The index is widely watched as a measure of attitudes toward the economy. However, economists say it is not always a good indicator of trends in consumer spending, which makes up about two-thirds of the nation's economic activity.
Consumer Confidence Index 1



The fact that U.S. officials could not rule out further attacks immediately after 9/11, kept consumers here and abroad in a deeply uncertain state. The extent of that negative impact depended on whether the federal government would be able to find the individuals responsible for these actions and whether they could add some certainty that this would not happen again. That in its self had the potential to bring the economy down into a serious recession.

Furthermore, the general consensus on 9/11 was that liquidity could fall sharply depending on the U.S. government’s reaction to the attacks. It was important for financial institutions to counsel investors until they knew how the government would respond. It is my opinion that panic and complete and total uncertainty lead to the economic consequences, not the attacks themselves. As a result the global markets went into a free fall. The airline and travel industries suffered an immediate impact. The U.S. stock futures plunged after the first attack. Stock prices in Europe were hit hard, wiping out all gains in Frankfurt and Milan, with just oil stocks showing rises in Paris and London. Stock indexes across the Americas also plummeted and trading was eventually halted. The impact this had on the already shattered Latin American economies, in particular Argentina, Brazil, and Mexico was severe. Additionally, stocks in the United Kingdom saw their biggest one day point drop since October of 1987, with a 5.5% fall wiping roughly $98 billion off the value of London’s FTSE 100 index. Even worse was trading in Paris, off 7.4%, and Germany, off 9.2%. Trading was down 4% on the Toronto Stock Exchange, before being halted, while Brazilian markets were down 9.2% before they were closed. Tokyo shares plunged by 6% with the benchmark Nikkei trading under the 10,000 level for the first time in 17 years. The Tel Aviv 100 index dropped 2.2%. The result was that U.S. investors immediately fled to safe havens such as Treasury bonds and gold. Oil prices rose, and global economies were shaken as a result. The Global equity markets were already feeling the effects of investor uncertainty, while the U.S. dollar fell against the euro and the yen.

But although it has been a long while since business’ regained a sense of normalcy on Wall Street since then, a review of market history conducted shortly after the attacks shows that acts of terrorism against the U.S. had limited impact on the Dow Jones industrial average. “It’s more of a psychological event than an economic event,” said Robert Rodriguez, manager of FPA New Income Fund and FPA Capital Fund. Looking back on the Dow, U.S. stocks have bounced back from previous terrorist attacks. And, acts of war by the U.S. have also helped trigger market rallies. The following is a chart that exhibits the notion that acts of terror have limited impact on the economy.


DOW Reactions to Past Crisis % change after a week
Pearl Harbor 12/7/1941 closed down 1.27%
Gulf War 1/17/1991 closed up 4%
World Trade Center Bombing 2/26/1993 closed up 1%
Bombing of US Military Baracks in Saudi Arabia closed down 0.5%
Bombing of US Embassy in Nairobi, Kenya 8/7/1998 closed down 3%
Bombing of US embassy in Dar-es-Salaam, Tanzania 8/7/1998 closed down 3%
Bombing of US Marines Barracks in Beirut 10/23/1983 closed down 2.04%
Assasination of President Kennedy 11/12/1963 closed up 5.49%


In agreement with this review is Mr. Richard Wright, a friend and colleague of mine as well as an eighteen-year veteran of the stock market as a market maker and proprietary trader at leading firms throughout his career. Mr. Wright agrees with the opinion that that acts of terrorism against the U.S. had limited impact on the Dow Jones industrial average. In fact, he maintains the economy was trending downward since about April of 2000. “The .com era was the beginning of the end of investor confidence”, maintains Mr. Wright. “It provided the public with instant access to the markets. This means of access eventually led to a buying frenzy but what it didn’t do was educate these investors. That lack of investor knowledge caused tremendous price swings and remarkable financial opportunities for traders like myself. It was that sudden influx that simultaneously forced larger institutions to add further volatility to the markets in the sole effort to be on par with the “street” and not be out performed. That combination caused stocks to get overdone and the economy to slowly fall into a further recession ultimately causing investor confidence to decline and consequently lessened the market volatility when the .com era abruptly ended.”

When asked about 9/11 and his recollection of the events of that morning from a traders perspective, Mr. Wright states the following. “That morning I came in long, (the name for a person owning a security), technology stocks because on the evening of 9/10 there was every indication the market would open higher on 9/11. But when the first plane hit, I and every other trader were forced to trade on an investor panic mindset. Investors had no idea what was happening and just panicked, they were selling their entire inventory and we were there to buy it through the third markets, knowing there would be stabilization momentarily. And there was and then we sold stock for a profit. Then the second plane hit and the same cycle repeated itself.” When asked if there was any remorse or sympathy through the trading room Mr. Wright replied, “There was shock initially, but no one knew what was going on yet so it was business as usual. We had no idea of the outcome but even if we did there was nothing we could do about it and not trading would not have made a single difference. It wasn’t until the markets were closed that we had a moment to sit back and mourn. It was then that I suddenly realized people were dead and America was under attack. I felt fear for my life and that of my family. It was then that I suddenly heard screams and saw colleagues crying hysterically because they couldn’t contact their spouses. It was then that we all ran down the stairwells into the streets frantically only stopping occasionally to watch a live broadcast of the news.” When asked if he would have continued trading if the markets remained open he confesses, “knowing what I know now no, but if I didn’t know, yes, I would have stayed and made a fortune.”

It was that comment that eerily reminded of my own experience the morning of 9/11 and the consensus in our trading room. The following is an excerpt from my own 9/11 memoirs, (see exhibit I, 9/11 Memoirs.) “In the midst of things firms in the Towers were routing their customer orders to us because they were non functional. Panic was setting in on behalf of investors and there was tremendous volatility. The shouting had begun across our trading floor, there was money to be made now and everyone was hustling. Frowns turned to smiles as split second decisions earned ridiculous profits. Information was being called out in every direction while every cell phone rang.”

My own personal experience clearly examples that there is a frenetic addiction with capitalization throughout the financial sector. It is the nucleus of the industry. However, I do not believe that the fanaticism is comparable to that of the psychological effects and motives of terrorists.

Which leads me to ask, who are these terrorists and what were their frenetic addiction with capitalization? After all, the attacks in New York City and Washington DC were at one and the same time very primitive, and extraordinarily sophisticated. They were primitive in the technological sense, in that no use was made of advanced weaponry or vast quantities of explosives. On the other hand, in terms of planning and orchestration, these attacks were extremely sophisticated. To recruit at least four suicide teams, including trained pilots, to prepare them to carry out complicated missions almost simultaneously, and then to carry out the attacks without being discovered and stopped by counter intelligence, points to extensive operational capabilities and great sophistication, one that the U.S. failed to identify. Meanwhile, as we reviewed, the panic caused by the attacks immediately caused financial turmoil in exchanges all over the world. Securities exchange investigators on three continents immediately pored over trading records to determine whether one or more parties profited by their advance knowledge of the disaster. Investigations focused on the many different ways and places in which profits could be made.

The Associated Press, (AP), quoting a government source, said the Securities and Exchange Commission (SEC) had received information from other U.S. regulators about possible suspicious trading earlier in 9/01 in put options. (An option that gives the holder (buyer) the right to sell the underlying asset at a specified price within a specified period. A premium is paid to the seller or writer of the option.) AP reported that in the days before the attacks, unusually high numbers of put options were purchased for the stocks of AMR Corp. and UAL Corp., the parent companies of American Airlines and United Airlines, each of which had two of its planes hijacked. Significantly, there was no such trend reported involving other major airlines. Additionally, according to a report in The Wall Street Journal, the Securities and Exchange Commission said it had received information from various U.S. agencies about possible trading by terrorists in industries affected by the bombing, including insurance and the airlines. Again, there were similar reports of suspicious trading in put options.

The San Francisco Chronicle quoted John Kinnucan, a principal of Broadband Research, an independent telecommunications research firm, as saying that the put options numbers were definitely unusual. "I saw put-call numbers higher than I've ever seen in 10 years of following the markets, particularly the options markets," he said. "When one sees this type of activity, the first thing one does is ask oneself, 'What is the explanation? What are people worried about?'" This would be the first of many clues that later were determined to be terrorist trading activity at the expense of thousands of lives.

The suspicion of terrorist trading prior and on 9/11 did not limit itself to the American Exchanges. The Madrid-based International Organization of Securities Commissions (IOSCO) with the help of London’s Financial Services Authority organized meetings immediately. Regulators from ten to twelve nations, including the United States, participated in teleconferences, and discussed the possibility that insiders had placed large bets in the days before the attacks.

European regulators with the support of U.S. investigators immediately began reviewing suspicious stock movements of reinsurance companies. Reinsurance companies provide coverage for losses by insurers. Regulators studied stock movements of three large European reinsurance companies including Germany's Munich Re, Switzerland's Swiss Re and AXA of France. France's AXA reportedly asked France's stock market regulators to look into whether its shares were the object of short-selling, (the selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller. Short sellers assume the risk that they will be able to buy the stock at a lower amount than the price at which they sold short), on behalf of Osama bin Laden.

So what will happen next? The investigation is seeking to follow the money trail back to the perpetrators, in order to learn who ultimately gave the order. Unfortunately, the task may prove exceedingly difficult, if not impossible. Part of the problem is that the amount of money involved was relatively modest, probably several hundred thousand dollars spent over the past few years. The only relatively large expenditure was flight training tuition ranging from $10,000 to $20,000 per person for some of the hijackers. Additionally, tracking investments may prove fruitless as well. One of bin Laden's associates told a U.S. federal court last year that Osama's money is now scattered among secret financial and commercial agencies in Europe and the Arab world, and that many of his business partners may not even know that they're working with him.

Money may also be transferred secretly by means of the traditional underground system known as hawala. From the Hindi word for "in trust," the hawala system transfers money deposited with a hawala broker in one country to a second broker in another country. Organized through a series of informal promises, such a system can move huge amounts of cash. None of it crosses borders, and apart from personal notes there's no record of the transactions.

But even the more standard banking systems may prove an impenetrable wall to investigators. Supposedly untraceable financial services are advertised in more than 60 nations. In many places in the world investors can set up anonymous corporations in which deposits and withdrawals can be made without being traced. Even legitimate banks have strict controls on who is allowed access to client records.

The solution seems to point to greater accountability. In fact after the attacks the British government called for robust action from international partners, particularly Switzerland, to ensure greater transparency in the global financial system. British finance chief Gordon Brown has said that the key to cutting off the flow of funds to terrorists is reporting, and has urged all financial institutions to declare dubious transactions so that there is not only no safe haven for terrorists but no hiding place for terrorist money.

U.S. President George W. Bush ordered an immediate freeze of all assets in the U.S. of suspected Islamic terrorist groups, individuals, and "humanitarian" organizations that funnel money to terrorists. An executive order signed in 9/01, gave the U.S. treasury secretary broad new powers to impose sanctions on banks around the world that fail to comply with required standards of reporting.

"This executive order means that U.S. banks that have assets of these groups or individuals must freeze their accounts," Bush said in a press conference. Immediately after the executive order went into force, the government electronically notified 5,000 American banks of its provisions.

"Money is the lifeblood of terrorist operations," Bush said. "Today, we're asking the world to stop payment." Unlike previous attempts to freeze terrorist assets, President Bush’s executive order's extended beyond U.S. borders. Bush emphasized that any foreign banks that did not cooperate with American investigators could be cut off from doing business in the U.S., and would not be able to use or withdraw their funds on deposit in American banks.

In seeking the cooperation of banks throughout the world, the U.S. administration hopes not only to undermine the power-base of terrorist organizations, but also to draw legal institutions in other countries into the fight against terrorism.

Groups and individuals named in the Executive Order

Sources: New York Times, Boston Globe, and Associated Press


Groups: Individuals:
Al Qaida/Islamic Army
Abu Sayyaf Group
Armed Islamic Group (GIA)
Harakat ul-Mujahidin (HUM)
Al-Jihad (Egyptian Islamic Jihad)
Islamic Movement of Uzbekistan (IMU)
Asbat al-Ansar
Salafist Group for Call and Combat (GSPC)
Libyan Islamic Fighting Group
Al-Itihaad al-Islamiya (AIAI)
Islamic Army of Aden

Osama bin Laden
Muhammad Atif (aka Subhi Abu Sitta, Abu Hafs Al Masri)
Sayf al-Adl
Shaykh Sai'id (aka Mustafa Muhammad Ahmad)
Abu Hafs the Mauritanian (aka Mahfouz Ould al-Walid, Khalid Al-Shaqiti)
Ibn Al-Shaykh al-Libi
Abu Zubaydah (aka Zayn al-Abidin Muhammad Husayn Tariq)
Abd al-Hadi al-Iraqi (aka Abu Abdallah)
Ayman al-Zawahiri
Thirwat Salah Shihata
Tariq Anwar al-Sayyid Ahmad (aka Fathi, Amr al-Fatih)
Muhammad Salah (aka Nasr Fahmi Nasr Hasanayn)
Makhtab Al-Khidamat/Al Kifah
Wafa Humanitarian Organization
Al Rashid Trust
Alleged front:
Mamoun Darkazanli Import-Export Company



In conclusion, I believe it is critical to concentrate on the Treasury Departments asset seizure arms as a solution to the threat of terrorists laundering money into the U.S. banking institutions. The financial sector needs the technological software to determine if the U.S. is doing business with known terrorists or their affiliates. This will ultimately disrupt the financial lifeline
of the terrorists.

And furthermore, despite frenetic addiction I am well aware of the economic repercussions of these attacks. Psychologically as well as materially, U.S. imperialism won’t be the same. But I believe the economy’s tumble into a recession is due to the madness and chaos inherent in the capitalist system itself. Perhaps only world socialism can end the instability and uncertainty now.


Works Cited
1. Barber, Benjamin. Jihad vs. McWorld. New York, Ballentine Books 1995.
2. Elliot, Michael. Not All Terrorists Are Alike. 03, June 2002,
3. Elliot, Michael. Why East Asia’s Economies Are Hot. 13, May, 2002,
4. Goldman, Corey. The Ripple Effect: Already Weak Economy Staggering From Terrorist Attacks; Worst May be Yet to Come. 20, September 2001, Reeling After Attacks
5. Hoffer, Eric. The True Believer, Thoughts on the Nature of Mass Movements. New York, Harper 1951.
6. ITC Terrorism News Archive. Bush orders Freeze of Assets Linked to Terrorists. 25, September 2001,
7. Franco, Lynn. Consumer Confidence Falls Nine Points in July. 30, July 2002,
8. Husseini, Sam. Stock Market Slide: What does it Mean? 22, July 2002,
9. Kadlec, Daniel. Sunken Treasure? How to spot value in a stock market that’s probably heading north. 12, August 2002, TIME New York, New York
10. Lahart, Justin. The Search for the Bottom. 15, July2002,
11. Lichtblau, Eric. Money-Laundering Rules Awash in the Bureaucracy. 27, June 2002,
12. Machiavelli, Niccolo.The Prince. New York, Penguin Books 1997.
13. Office of Foreign Assets Control (“OFCA”) SDN & Blocked Persons 27, June 2002,
14. Petition to US Securities and Exchange Commission for Issuance of Interpretative Release: Appendix A – Proposed Interpretive Release. 15, April 2002,
15. Shostak, Frank Dr. When will the American Economy Start to Recover? 29, October 2001,
16. Staff. Horror Struck Investors Seek the Havens of Gold and Bonds. 11, September 2001,
17. The Investor Advocate: How the SEC Protects Investors and Maintains Market Integrity. December 1999,
18. Toulmin, Stephen. The Uses of Argument,Cambridge,Cambridge University Press 1958.
19. Wong, Edward. United Wants Loan Backing From U.S. 25, June 2002,


Exhibit I 09/11 Memoirs

It is Tuesday morning on September 11, 2001. I am in my car heading toward my office in Jersey City, NJ. I am flipping between 1010 Wins and Bloomberg Radio and calling the office periodically to check on pre-open stock activity. Everything seemed fine there were no major catastrophes and the entire staff was in so I need not worry about taking my time. I opened up the sunroof and took in the morning breeze, the sun was shinning and the sky was clear, what a gorgeous day! Then all of a sudden there was traffic. I am nearing Newark airport inching my way over the Pulaski Skyway and there was traffic everywhere apparently there had been an accident and everyone was rubbernecking.

In the meantime I call Richard. He is in midtown Manhattan at his firm following the pre-open and placing orders as usual usual. We chat and toy with the idea of meeting downtown for lunch later that afternoon, after all, I am just one stop away from the World Trade on the PATH train.

We wish each other well and finally I am in my parking garage. I quickly notice groups of people are congregated in the lobby looking over the Hudson River, I want to stop but I can't. I get wind the market is getting killed, but why? Then I learn there is a fire in the World Trade and just then I lose my cell phone signal on my way up to the 30th floor of my office. I arrive in the trading room to find mayhem.

Everyone has handsets to each ear while dialing cell phones. Quickly, we check on clients, customers and competitors at the World Trade. But we are still baffled there is conflicting information. Soon after our phone lines go down followed by a rumor that a small plane has crashed into the towers. I can see the towers directly in front of me spitting out flames. I am afraid. I don't know why yet. My colleagues are in a panic calling their husbands and wives in the Towers but the lines are so congested at that point we are depending on the news.

Somehow, I get Richard on the phone again and we can't believe what is going on. And in the midst of things firms in the Towers are routing their customer orders to us because they are non functional. Panic is setting in again but this time for a different reason. The shouting has begun, there is money to be made now and everyone begins to hustle. Frowns turn to smiles as split second decisions earn us ridiculous profits. Information is being called out in every direction while every cell phone is ringing. Instructions are being shouted over the intercom system. Richard is still on the line with me, I am multitasking beyond belief, and then it is confirmed that a plane has crashed into the towers. A plane, what is going on? Stocks are getting killed. Airline stocks have just plummeted.

My brain hurts it’s working so fast, and then I yell at the top of my lungs to Richard, "There's another fucking plane!" I yell to Richard as if in slow motion everything I see, he repeats it to his trading staff, I hear them screaming, "You're fucking crazy, it's not on TV, who are you talking to?" They didn't know I felt our floor vibrate; there was a throaty deep vibration with a screeching sound of acceleration. I turned and there was an enormous plane so close I could touch it, I couldn't take my eyes off it, I dropped the phone, and my mouth fell open. Then I watched and heard the impact. I saw fire and smoke and I knew there was death. I began shaking and crying. I was frantic.

I ran and I called for everyone to follow me. My body took over it reacted in a state of survival and terror as it protected me. I saw people running everywhere in every direction, I fell and broke my heel. I was running barefoot and managed to cut my feet while racing to my car. While I was driving I saw cars in every lane following no rules, just panicking. Newscasters were spewing information on the radio.

Then I realized I was stuck near the Lincoln Tunnel where it was still morning rush hour. I felt my nerves jittering as I prayed that I could it to my mothers house since she was the closest in the area. Then the news hit that it was an act of terror and the bridges and tunnels were shut down. Again there was mayhem people and began jumping out of their cars fearing the tunnel would explode. My body took over once again; I accelerated my car over the sidewalk as my body led the way.

My final stop was my mothers’ house. I collapsed into her bosom choking on my tears. The sight that would follow from her terrace would be the most horrific vision of our lives.