It was impossible to estimate the loss of life Tuesday when two planes crashed into the twin towers of New York's World Trade Center. But when those giant buildings crumbled to the ground, it's likely many people in the financial services business were killed.

Companies with offices in the World Trade Center include boutique investment banks Sandler O'Neill & Co. and Keefe Bruyette & Woods and the Federal Home Loan Bank of New York.

Morgan Stanley had 3,500 people in the complex. "We are all saddened and outraged by the attack on America today, and extend our deepest sympathies and prayers to all the people affected," chairman and chief executive Philip J. Purcell said in a statement. "We have limited information about the disaster… and we are working diligently with local authorities to determine the facts regarding their safety.

"We want our clients to know that, in spite of this tragedy, all of our businesses are functioning and will continue to function. We are committed to resume full operations as exchanges and markets reopen. All our clients should rest assured that their assets are safe."

The banking system seemed steady throughout the dramatic day, which also included a third plane that crashed into the Pentagon building here. L. William Seidman, former FDIC chairman, attributed the stability to federal deposit insurance. "Always the great fear is that people will panic and want to get their money out of the banks," he said. "Once again deposit insurance will prove how valuable it is in times of uncertainty."

While many banks closed offices in New York, Washington, and beyond, there were no reports of disruptions to the payments system and the Federal Reserve remained open and ready to provide cash where needed. Some banks, particularly those on the East Coast, did experience a greater volume of withdrawals, but most bankers said business was relatively normal.

"I have no information about any problems now," a Federal Reserve Board spokesman said late Tuesday afternoon. "The Federal Reserve banks are processing checks today."

However, Tuesday's devastation could have long-term repercussions, including tipping an already shaky economy into a recession.

"This act has the potential to bring the economy down into a serious recession," said Anthony Chan, chief economist at Banc One Investment Advisors in Columbus, Ohio. "It's clear that economic activity will come largely to a standstill for quite some time. This is a terrible tragedy that will hurt the U.S. and many other people around the world in a way that we will remember forever."

Sung Won Sohn, Wells Fargo's chief economist, in a research note Tuesday compared the effects on the economy from the attacks to the impact of the 1990 Gulf War, when the economy contracted for three quarters. The Gulf War hurt consumer confidence, retail sales, and the value of the dollar, and the price of crude oil rose.

"Recently, the economy has been on a high wire act straddling between a recession and an anemic growth," he wrote. "The damage to confidence will push us into a recession." Mr. Sohn, among other economists, predicted the Fed will continue to cut interest rates.

The stock and bond markets were closed. "As a safety precaution while the tragic events of today are sorted out, the securities markets have decided not to open for trading today," Securities and Exchange Commission chairman Harvey Pitt said in a statement.

Mr. Sohn said there may be a stampede of selling when the financial markets reopen, and the system may have trouble handling orders. In addition, insurance companies will receive claims amounting to tens or even hundreds of billions of dollars, he estimated.

"At least temporarily, the financial system could be frozen, further damaging the economy," he said.

Kenneth H. Thomas, a lecturer in finance at the Wharton School in Philadelphia, said the tragic event came at a bad time for banks that are already struggling with a raft of bad loans. "Those businesses that were slow on their loan payments, we're likely to see even more deterioration," he said. "We're likely to see continued impact on credit quality in loan portfolios.

"This can cause a lot of uncertainty, like in the presidential election where everything came to a halt," he said. "It won't be clear in dollars and cents what the impact is, but financial markets don't like uncertainty. This is "Uncertainty" with a capital U."

Major financial institutions took precautions in light of the uncertainty, particularly institutions with tall buildings in major cities.

For example, all these buildings were evacuated: the Sears Tower in Chicago; the two tallest buildings in Boston, the John Hancock Tower and the Prudential building; and the Transamerica Pyramid, one of San Francisco's most notable landmarks.

At ground zero in New York, most banks closed for the day. J.P. Morgan Chase & Co. shut all its branches and reported long lines at ATMs while FleetBoston Financial Group closed its branches in the city. Commerce Bancorp in Cherry Hill, N.J., is expanding into New York City, but canceled its "grand opening" scheduled for Thursday.

After years of industry consolidation, Charlotte, N.C., now ranks as the nation's second-largest banking center, and officials apparently feared the city might become a target as well.

Wachovia Corp. evacuated its headquarters there and closed all 2,900 branches in its 11-state territory to protect customer and employee safety, a spokesman said. All back-office systems, ATMs, and online banking sites were functioning normally. "We're not aware of any impact on customer accounts," he said.

Bank of America also evacuated its 60-story headquarters in Charlotte, and a spokesman said office towers in other major cities, including Atlanta and Seattle, also were evacuated. BofA closed several hundred branches in northern Virginia and Washington, D.C., as did SunTrust Banks Inc. of Atlanta.

Spokesman Scott Scredon said he had heard no reports of runs on any bank branches. Aside from the Washington-area offices, more than 4,000 other B of A retail offices nationwide remained open, and the bank's ATM network was functioning. "We're taking appropriate steps to provide normal service to as many customers as possible. We expect to return to business as usual tomorrow in the majority of our markets," he said.

Bank of America had about 150,000 square feet in the World Trade Center complex, but Mr. Scredon said he was unsure how many employees worked there or what may have happened to them Tuesday. Another source said a Bank of America employee said about 600 people worked there, and all were evacuated. Mr. Scredon was unable to confirm that information. Most of Bank of America's New York-based employees work in two buildings in Midtown Manhattan, which were unaffected.

Joseph J. Caldas, vice president in the municipal department at Hartfield, Titus & Donnely LLC in Jersey City, N.J., across the Hudson River near lower Manhattan, said he saw a plane flying near lower Manhattan suddenly turn and crash directly into one of the World Trade Center Towers.

"The plane just suddenly turned and flew right into the building," he said. "Flames shot out and it looked like a bomb exploded. I was looking through a telescope and saw people falling out of the building. There's a lot of dead people over there. It's like a war."

Sandler O'Neill was on the 102nd floor of Tower Two of the World Trade Center. Approximately 175 of the company's 200 employees occupied the space. Staff started to evacuate the building after a plane crashed into the first tower, and smoke started to infiltrate the building, said a source who asked not to be named. When the second plane crashed, Sandler O'Neill was holding its morning meeting by conference call and employees in other cities heard a boom and then communication was cut off.

Keefe Bruyette, a 212-person investment bank that specializes in the financial services industry, had more than 100 people on 88th and 89th floors of tower 2. A source in one of KBW's other offices said some employees managed to get out of the building in time, but he did not know how many.

Malin Jennings, spokeswoman for the Council of Federal Home Loan Banks, said she called the Federal Home Loan Bank of New York -- located on the 22nd floor of the World Trade Center -- right before the second airplane hit. "It would have been a little before 9 this morning and they were just evacuating. At the time, I heard things were OK," she said.

The National Association for Business Economics was beginning the final day of its four-day annual meeting at the Marriott hotel in the World Trade Center Tuesday. Among those expected to speak were Richard B. Berner, chief U.S. economist for Morgan Stanley and president of NABE; Richard D. Rippe, chief economist for Prudential Securities; Diane Swonk, chief economist at Bank One Corp., and Mark Vitner, a Wachovia economist.

A family member of Mr. Vitner said he got away with only scratches, and former NABE president, Maureen Haver, president of Haver Analytics, said everyone was able to get out before the building collapsed. "Fortunately for us, we were sort of in the basement," she said. "We had plenty of time to evacuate."

Merrill Lynch & Co. was scheduled to begin the second day of an investor conference featuring executives such as Citigroup chief Sanford I. Weill, PNC chairman James E. Rohr, and Capital One Financial Corp. chairman Richard Fairbank. It was canceled.

This story was reported by Erick Bergquist in New York, David Boraks in Charlotte, N.C., Ben Jackson in Chicago, Laura Mandaro in San Francisco, and Alan Kline, Barbara A. Rehm and John Reosti in Washington. Sean Monsarrat from the Bond Buyer contributed to this story.

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