This week, leading executives from the banking and finance industry reflect of the how the economic climate compares with the recession following the Sept. 11, 2001 terrorist attacks.
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Alan Badey, co-managing partner, Citrin Cooperman & Company L.L.P., White Plains
“Although there are certain similarities between the last economic downturn in 2001 following the dot-com bust and 9/11, the differences between then and now are striking.
“In 2001, the residential real estate market was strong. Now as a direct result of the subprime crisis, the residential market is leading the decline. In addition, basic necessities like utilities, oil and food prices were fairly stable at the beginning of the decade. So even though you had a collapse of the stock market, the Internet sector and the airline sector took a big hit due to a drop off in airline travel after 9/11, the economy for a broader section of the country was still fairly stable.
“Nobody then could have dreamed, for example, that prices at the gas pumps would be approaching $5 per gallon on average, as they are today. And that even a celebrity like Ed McMahon would face foreclosure of his home.
“On the job front, unemployment has been significant during both periods, but the current one is affecting a broader cross section of people.
“Something else to keep in mind is that due to the subprime mess, a lot of banks are now in trouble. Back in 2001, banks were strong. Now they’re lending at much higher rates and are much tighter with their credit policies, which is trickling down to the small business owners and consumers”.
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Howard Klein, managing partner, Eisman, Zucker, Klein & Ruttenberg L.L.P., White Plains
“The current recessionary economic climate is, for the most part, caused by a combination of foreign policy and trade blunders, poor government regulation and oversight and greed. It is the cumulative effect of failed U. S. foreign policy, the U.S. foreign trade deficit, the Iraq war, the subprime mortgage crisis, foreign oil speculators and a lack of timely alternative fuel development. Essentially, the present recession seems to have been created by the decisions and actions of the federal government, which may have been made to serve the economic good of “special interests” or were simply a continuous stream of bad decisions.
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“The 9/11 recession was caused by an abrupt, single event from an external source ”“ an attack by foreign terrorists who destroyed the two World Trade Center buildings ”“ creating an atmosphere of fear and uncertainty. In this case, the adverse economic impact of the event was short lived.
“The current economic climate, which has continuously worsened over the past five years, has created deeper, more long-term problems. It has greatly increased the cost of most goods and services ”“ negatively affecting individual purchasing power, returned many families to poverty levels, greatly diminished the middle-class quality of life and are the cause of an increasing separation between the wealthy and the poor in America. At this point, it looks like the current recession, because of its deep-rooted causes in the economic structure of America, will be far longer term than the recession after 9/11.”
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