25 Years Later: Smith School Professors Reflect on the Financial and Policy Legacy of 9/11

The Robert H. Smith School of Business joins the University of Maryland community and the entire country in a day of remembrance for the 25th anniversary of the September 11, 2001 attacks. 

The attacks serve as an inflection point in the nation’s history, claiming the lives of nearly 3,000 individuals across the crash sites in New York, Virginia and Pennsylvania, and creating ripple effects felt to this day, largely in the form of ongoing geopolitical tensions, national security policies and long-term health complications for first responders and survivors exposed to toxic dust and debris.

Smith School professors Albert “Pete” Kyle and Roland Rust both vividly recall witnessing the attacks on television. They also remember the recovery efforts and how the country grappled with the immediate aftermath, including repairing physical and financial infrastructure, restoring confidence in the airline industry and promoting national unity.

Related: Professor Emeritus Martin Dresner elaborates to Maryland Today on how 9/11 reshaped airport security through TSA federalization, passenger fees, and stricter screening. Early delays eased with programs like PreCheck, and while some measures prove imperfect, they remain vital for public confidence as debates continue over potential decentralization under federal oversight.

From a financial perspective, the attacks represent the largest single man-made or terrorist insured loss, with approximately $40 billion generated in insurance claims. They also rank among the costliest single-event insured disasters in modern U.S. history, only surpassed by natural disasters like Hurricanes Katrina and Ian. 

On Wall Street, trading in the wake of the attacks resulted in historic losses. The New York Stock Exchange experienced its longest shutdown since 1933, remaining closed for four consecutive trading sessions. At the close of trading on the Friday after the attacks, an estimated $1.4 trillion was lost between the Dow Jones Industrial Average and the Standard and Poor’s index, representing a dramatic nosedive for an economy already feeling the impact of the dot-com bubble recession.

Kyle, a Distinguished University Professor and the Smith School’s Charles E. Smith Chair Professor of Finance, says that despite the attacks, the country’s “financial infrastructure actually performed really well” and displayed resilience due to remote backup facilities and emergency operational relocation. 

Kyle says the private sector’s ability to recover after roughly a week following the attacks also demonstrated resilience. However, compared with other crises where the private sector is expected to bail out the economy, the Federal Reserve offered relief by cutting interest rates and “providing a lot of liquidity to the financial system.”

“If some of your systems weren’t fully operational when the World Trade Center was hit, then you might not have been able to get your hands on cash that you would normally have been able to get your hands on,” says Kyle. “The Fed provided cash to keep the economy going as it did with the 1987 market crash, and it’ll do the same thing in major events where it expects temporary effects.”

Notably impacted in the stock market were U.S. airline companies, especially American Airlines and United Airlines. In the month leading up to the attacks, U.S. air travel observed a record high of roughly 65 million passengers. Passenger volume would not recover to those levels until almost four years later. 

The U.S. government’s response to the attacks forever shaped the airline industry as it worked to install travel safeguards and restore passenger confidence in flying. One example is the creation of the Transportation Security Administration (TSA), which introduced permanent screening procedures and security checkpoints in all commercial airports.

“It used to be the case that you could walk to the airport with someone and see them off at their gate,” says Rust, Distinguished University Professor and David Bruce Smith Chair in Marketing at the Smith School. “After 9/11, serious security measures became the new normal, and we’ve lived with that ever since.”

The impact of screening policies is evident in the lack of substantial subsequent attacks in the years since, says Rust. 

“It’s been by and large quite successful. Over time, people felt more and more safe, and now we’ve seen TSA back off a bit on them with the introduction of classes of service like Pre-Check and Clear,” says Rust. “We also hope that we have the ability to stop these kinds of attacks in advance now.”

This year’s anniversary is an apt moment to reflect on how the country and its systems responded to the attacks, and lessons that can be applied to a world that has changed significantly since then.

Among the important lessons, according to Kyle, are the continued need for a resilient financial system, respect for the Fed’s ability to put money into the system for recovery efforts and emphasis by the federal government on preemptively acquiring the cooperation of allies to deal with perpetrators “in a manner that will preserve the world economy.”

Kyle also believes that while the threat of physical attacks will persist, U.S. institutions must also prepare for potential future digital attacks powered by artificial intelligence, whether by a foreign adversary or even by accident.

“The extremely competent abilities of AI might make digital attacks a bigger threat, but AI could also help protect us against these types of attacks,” says Kyle. “I’m not sure how safe our financial system is now, but I’m more worried about digital attacks because we just don’t know what AI can or will do. And slowing down AI development is not an option.”