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Context of 'Early September 2001: NYSE Sees Unusually Heavy Trading in Airline and Related Stocks'

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The highly respected Jane’s Terrorism and Security Monitor reports that US intelligence is worried that bin Laden is planning a major attack on US soil. They are said to be particularly concerned about some kind of attack on New York, and they have recommended stepped-up security at the New York Stock Exchange and the Federal Reserve. [NewsMax, 10/5/1999]

Entity Tags: New York Stock Exchange, Osama bin Laden

Timeline Tags: Complete 911 Timeline

Paul Kurtz.Paul Kurtz. [Source: Publicity photo]Counterterrorism “tsar” Richard Clarke and Paul Kurtz, a member of the White House counterterrorism team, visit New York, where they tour the facilities of the stock exchange and telecommunications company Verizon, and inquire about security precautions there. Clarke will later describe that, about a month before 9/11, he and Kurtz spend “two days literally crawling around Wall Street.” They visit the floor of the New York Stock Exchange and also go through the tunnels that carry the fiber optic cable to the Verizon and AT&T switches. (Verizon has a switching center for Wall Street located next to the World Trade Center.) Clarke and Kurtz ask about the security precautions that are in place to protect such a large concentration of critical communications equipment. According to Clarke, “What they told us was that after the 1993 attack against the World Trade Center they had diversified some of their routing capability.” Clarke will recall that he and Kurtz identify “several buildings that, were they taken out, would disconnect Wall Street from the world.” The two men also talk to stock market officials about the need for alternative sites and backup facilities. [Verton, 2003, pp. 157; Clarke, 2004, pp. 19-20]
Infrastructure Examined by Clarke Damaged on 9/11 - On September 11, damage to some of the telecommunications infrastructure Clarke and Kurtz inspect will severely hamper communications in the area surrounding the WTC, including the financial district (see (After 10:00 a.m.) September 11, 2001). The New York Times will describe: “The collapse of the World Trade Center crippled many of the connections that downtown Manhattan depended on, threatening crucial links for the police and emergency crews. Cellular sites were knocked out.… Fiber-optic transport equipment was crushed. Power failures cut off high-speed Internet service for many companies across the city.” Verizon’s switching center at 140 West Street will be badly damaged by falling debris and burst water pipes. AT&T officials will say “they are certain that they lost several pieces of sophisticated equipment in the basement of the World Trade Center that were used to transport data over fiber-optic cables.” [New York Times, 9/20/2001; General Accounting Office, 2/2003, pp. 91-92 pdf file; Jenkins and Edwards-Winslow, 9/2003, pp. 33 pdf file; 9/11 Commission, 2/25/2004 pdf file] As journalist and author Dan Verton will note, “For Richard Clarke, the digital destruction that severed Wall Street from the world [on September 11] was a nightmare come true.” [Verton, 2003, pp. 157]

Entity Tags: Paul Kurtz, Richard A. Clarke

Timeline Tags: Complete 911 Timeline, 9/11 Timeline

The Securities and Exchange Commission (SEC) later announces that they are investigating the trading of shares of 38 companies in the days just before 9/11. The San Francisco Chronicle reports that the New York Stock Exchange sees “unusually heavy trading in airline and related stocks several days before the attacks.” All 38 companies logically stand to be heavily affected by the attacks. They include parent companies of major airlines American, Continental, Delta, Northwest, Southwest, United, and US Airways as well as cruise lines Carnival and Royal Caribbean, aircraft maker Boeing and defense contractor Lockheed Martin. The SEC is also looking into suspicious short selling of numerous insurance company stocks, but, to date, no details of this investigation have been released. [Associated Press, 10/2/2001; San Francisco Chronicle, 10/3/2001]

Entity Tags: US Securities and Exchange Commission, New York Stock Exchange

Timeline Tags: Complete 911 Timeline, 9/11 Timeline

The trading ratio on United Airlines is 25 times greater than normal at the Pacific Exchange. Pacific Exchange officials later decline to state whether this abnormality is being investigated. [San Francisco Chronicle, 9/19/2001]

Entity Tags: United Airlines, Pacific Exchange

Timeline Tags: Complete 911 Timeline, 9/11 Timeline

The New York Stock Exchange closes. It is a short distance from the WTC. [MSNBC, 9/22/2001]

Entity Tags: New York Stock Exchange

Timeline Tags: Complete 911 Timeline, 9/11 Timeline

The New York Stock Exchange, closed since the 9/11 attacks, reopens. During the next five days, the Dow Jones drops nearly 2000 points, but then soon rebounds to above pre-9/11 levels. The attacks caused more than $20 billion in property damage to buildings in New York City and Washington. According to one estimate, the work stoppage and other loss of economic output costs about another $47 billion, making the attacks the costliest man-made disaster in US history. [ABC News, 9/10/2002]

Entity Tags: New York Stock Exchange

Timeline Tags: Complete 911 Timeline, 9/11 Timeline

$2.5 million in put options on American Airlines and United Airlines are reported unclaimed. This is likely the result of the suspension in trading on the New York Stock Exchange after the attacks which gave the SEC time to be waiting if the owners showed up to redeem their put options placed the week before the 9/11 attacks. [San Francisco Chronicle, 9/29/2001]

Entity Tags: New York Stock Exchange, American Airlines, United Airlines

Timeline Tags: Complete 911 Timeline, 9/11 Timeline

Jay Hallen, a 24-year old Yale graduate, is bored with his job at a real-estate firm. He is fascinated with the Middle East, and has taken some Arabic classes and read some history books about the region. He contacts Reuben Jeffrey, an adviser to CPA head L. Paul Bremer whom Hallen had met in 2002 when trying to land a job at the White House, and asks if there is a job for him in Baghdad.
'I Don't Have a Finance Background' - Three weeks later, Hallen is in Baghdad, and meets with Thomas Foley, the CPA official in charge of privatizing Iraq’s state-owned enterprises. Foley, a former classmate of President Bush and a major Republican donor, says he is putting Hallen in charge of Baghdad’s stock exchange. Hallen is shocked. “Are you sure?” Hallen asks. “I don’t have a finance background.” No problem, Foley responds. He will be the project manager; his subordinates will do the actual work. Before the invasion, Baghdad’s stock exchange was primitive by American standards; author Rajiv Chandrasekaran will describe it as loud, boisterous, and, despite all appearances, quite functional. After the invasion it was looted to the bare walls and ignored by the first wave of US economic reconstruction specialists. But Iraqi brokers and businessmen want it reopened, so the CPA acquiesces.
Revamping the Exchange - Hallen launches an ambitious, if almost entirely ignorant, plan to modernize and upgrade the stock exchange to make it the most technologically sophisticated exchange in the Arab world. He also wants to implement a new securities law that would make the exchange independent of the Finance Ministry. The Iraqi brokers and businessmen who clamored for the exchange to reopen are horrified at Hallen’s plans. “People are broke and bewildered,” broker Talib Tabatabai—a graduate of Florida State’s business department—tells Hallen. “Why do you want to create enemies? Let us open the way we were.” Tabatabai, like other brokers, believes Hallen’s plan is ludicrously grandiose. “It was something so fancy, so great, that it couldn’t be accomplished,” he will later recall. But Hallen is unmoved.
Hallen's View - “Their laws and regulations were completely out of step with the modern world,” Hallen will later say. “There was just no transparency in anything. It was more of a place for Saddam and his friends to buy up private companies that they otherwise didn’t have a stake in.” To just reopen the exchange the way it was, Hallen will insist, “would have been irresponsible and short-sighted.” Hallen recruits a team of American volunteers, most with no more experience or knowledge of finance than he has, to rewrite the securities laws, train the brokers, and purchase the necessary computers. By the spring of 2004, CPA head Bremer approves the new laws and appoints nine Iraqis hand-picked by Hallen to become the exchange’s board of governors.
No CPA Role - The new exchange board names Tabatabai as its chairman. The new laws have no place for a CPA adviser as a decision-maker; immediately a conflict between Hallen and the board arises. Hallen wants to wait several more months for the new computer system to arrive and be installed; unwilling to wait, Tabatabai and the board members buy dozens of dry-erase boards for the exchange floor, and two days after Hallen’s tour ends, the exchange is open for business. Without CPA oversight, the exchange quickly begins functioning more or less as it did before the invasion. When asked what would have happened had Hallen not been assigned to reopen the exchange, Tabatabai will answer: “We would have opened months earlier. He had grand ideas, but those ideas did not materialize.… Those CPA people reminded me of Lawrence of Arabia.” [Washington Post, 9/17/2006]

Entity Tags: Rajiv Chandrasekaran, Reuben Jeffrey, Talib Tabatabai, Thomas Foley, Iraq Finance Ministry, Coalition Provisional Authority, Jay Hallen, L. Paul Bremer

Timeline Tags: Iraq under US Occupation

Slate reports that two years after the 9/11 attacks, neither the Chicago Board Options Exchange nor the Securities and Exchange Commission will make any comment about their investigations into insider trading before 9/11. “Neither has announced any conclusion. The SEC has not filed any complaint alleging illegal activity, nor has the Justice Department announced any investigation or prosecution.… So, unless the SEC decides to file a complaint—unlikely at this late stage—we may never know what they learned about terror trading.” [Slate, 9/10/2003]

Entity Tags: US Department of Justice, US Securities and Exchange Commission, Chicago Board Options Exchange

Timeline Tags: Complete 911 Timeline, 9/11 Timeline

Amid reports of a $15.4 billion loss, $1.2 million in office redecorations and earlier-than-usual million-dollar bonuses using TARP funds, John Thain resigns as CEO of troubled firm Merrill Lynch, recently purchased by Bank of America.
Investigating Bonuses - While Thain forgoes a 2008 bonus, New York Attorney General Andrew Cuomo is investigating bonuses paid to Merrill executives in late December, right before the deal closed. Merrill normally pays bonuses in January or February. Cuomo is investigating performance bonuses for Merrill’s CEO and other top executives, calling the bonuses an “oxymoron” during such an “abysmal year.” According to Merrill’s securities filings, Thain’s salary was $750,000 last year.
$837,000 for Redecoration - “Spending company money on a lavish redo at a time when Merrill’s finances were rocky sends the wrong message,” said Amy Borrus, deputy director at the Council of Institutional Investors in Washington. “Given the dire straits that so many financial institutions are in, redecorating the corner office should be way down on their to-do lists.” Someone familiar with Thain’s New York office redecoration claims that the CEO paid decorator Michael Smith $837,000 and his purchases included $87,000 for area rugs, $25,000 for a pedestal table and $68,000 for a 19th century credenza. Smith, a Santa Monica, California-based decorator, was recently commissioned by Michelle Obama to decorate the White House.
35,000 Job Losses - Thain, a former executive for Goldman Sachs Group Inc. and the New York Stock Exchange, joins about 35,000 employees that Bank of America CEO Kenneth Lewis plans to eliminate over the next few years from the combined firms’ total of over 260,000 employees.
Abysmal Performance - Lewis’s credibility was undercut after Merrill reported a record fourth-quarter deficit. Lewis considered backing out of the deal after learning the extent of Merrill’s losses in December 2008, but went ahead with the buyout at the insistence of US regulators who provided a new $138 billion aid package. “There was a certain surprise that the Merrill losses were as steep as they were,” says James Post, a professor of corporate governance and business ethics at Boston University School of Management. “On top of that, I think Lewis didn’t think Thain was doing as much as he could to control the expenses and minimize the losses.” Shares in Bank of America, down 53 percent so far in 2008, slide another 14 percent to $5.71 by the close of New York Stock Exchange composite trading. Thain bought 84,600 shares in Bank of America, at $5.71 each, the day before his ouster, a filing showed. [Bloomberg, 1/22/2009]

Entity Tags: Andrew Cuomo, John Thain, Amy Borrus, Kenneth Lewis, Bank of America, Merrill Lynch

Timeline Tags: Global Economic Crises

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