PAUL KANGAS:It is the day after, the day after a horrifying terrorist attack tore at the fabric of America's financial and military institutions. While the rubble still smolders and the death toll continues to climb, we realize that the top priority of many Americans may not be Wall Street and the economy. Still, the economic future of the nation is a key factor in our recovery from this terrible tragedy, and it's our responsibility to report to you on this aspect of the situation. So, we begin with a late development. Late today, officials from the U.S. stock exchanges and the Securities and Exchange Commission announced the equities markets will not open for business tomorrow. Trading will resume as early as Friday but no later than Monday. Trading in U.S. Treasuries will start up again tomorrow. The fundamental question behind all of this of course is the current health of the economy. Washington Bureau Chief Darren Gersh reports.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Meeting with his National Security Council, the president declared America is going forward.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The Federal government and all our agencies are conducting business, but it is not business as usual.

GERSH: The president said he would ask Congress for emergency authority to spend whatever it takes to recover from the terrorist attacks. After meeting with the president, Congressional leaders from both parties pledged to work together to face the job ahead.

SEN. TOM DASCHLE, MAJORITY LEADER: It is to help the victims, to care for the families, and to punish those responsible.

GERSH: Federal officials monitoring the economic fallout also sought to reassure the nation the financial system is up and running.

KENNETH DAM, DEPUTY TREASURY SECRETARY: With some exceptions, finance, commerce and banking systems have worked effectively and continuously. Acts of evil will not cripple the markets.

GERSH: All major banks were open for business today, but the Federal Reserve did say its short-term lending to banks was substantially above normal levels yesterday, and the Fed will continue to lend as needed. Oil prices spiked on news of the attack, but fell sharply today after OPEC ministers promised there would be no shortage of supplies. The Energy Department also announced the U.S. stood ready to tap the strategic petroleum reserve, but energy markets are likely to remain volatile.

RAY PERRYMAN, CHIEF ECONOMIST, PERRYMAN GROUP: The real issue, we're going to have to see is how this plays out over the next few days and weeks, and what the responses are and what impact that has on the overall level of tensions in the Middle East, because that's the real deciding factor here.

GERSH: It is clear the economic damage from this attack will run well into the billions. Early estimates put the insurance damage between $10 and $15 billion.

CAROLYN GORMAN, VP, INSURANCE INFORMATION INSTITUTE: It is going to result in insured losses involving health insurance, property and casualty insurance, life insurance, aviation insurance.

GERSH: Lost economic output could cost billions more. Some economists worry fearful consumers will now adopt a bunker mentality, pulling back on spending and driving the economy into a deep recession. But economist Mark Zandi says it doesn't have to be that way.

MARK ZANDI, CHIEF ECONOMIST, ECONOMY.COM: If people don't lose confidence, if they continue on with their work and their spending and their investing, then there's a very good chance that we can still make our way through this without a full blown economic recession.

GERSH: And that was essentially the message the White House and Congress were sending today. Do not lose confidence. The nation is united and determined to face the challenges, economic and personal of this terrible moment. Darren Gersh, "NIGHTLY BUSINESS REPORT", Washington.

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SUSIE GHARIB: Let's talk more now about the economic implications of the terrorist attack on America. And joining me now at the NASDAQ market site we're happy to have with us Robert Hormats. He's the vice chairman of Goldman Sachs International and Robert Brusca, economist with his own consulting firm, Ecobest. Bob Hormats, let me begin with you. We already had an economic slowdown before this terrorist attack, and now this obvious is going to change everything. Tell us what you think the implications are?

ROBERT HORMATS, VICE CHAIRMAN, GOLDMAN SACHS INTL.: This will clearly make the slowdown considerably worse, in part because it undermines confidence in the US as a safe haven, makes us appear to ourselves and to the world more vulnerable. And second, consumers and investors are going to be even more cautious in the current environment. It will create, for a period of time at least, a sort of bunker down mentality which can be very troublesome.

GHARIB: Robert, let's talk a little bit about the consumer. The consumer's been the linchpin of our economy and it doesn't seem like anyone right now is in the mood to jump on an airplane or go on a vacation or spend money on clothing. What does this do for consumer confidence?

ROBERT BRUSCA, ECONOMIST, ECOBEST: Well, that's exactly it. What Bob said is the real issue. It will hurt confidence a lot. Confidence was already slipping before this happened and now I think you're going to find that the consumer is going to sit back and become more conservative. Spending will slow down. The slump will get deeper.

GHARIB: How much of a slowdown? How much does this shave off of gross domestic product?

HORMATS: I don't think anybody knows the answer to that question. But I think we will definitely start seeing negative GDP numbers and of course past that, it may be revised too. But this will clearly turn out to be a period of recession.

GHARIB: Does this push us into recession, Bob?

BRUSCA: I think there's a very good chance it will for the same reasons we've been talking about. The consumer will be reluctant and then there are going to be concerns about the capital markets. The government's going to have to go into the capital markets to a greater degree than in the past. That's good from a financial point of view but it will create concerns about the Social Security Trust Fund which could undermine confidence a little bit more.

GHARIB: Are there any pockets of strength in the economy? One thinks that perhaps defense spending might be stronger or perhaps construction spending for all the rebuilding that's going to be involved. Do you gentlemen see any pockets of strength in the economy?

HORMATS: Well, I think we have to be careful about this, that clearly this attack occurs, you start thinking of defense spending. But you know, the missile defense system would not have protected us against this. The kind of spending that you need is spending that will be subtle, that will be sophisticated. You need more intelligence. For that you need agents. You've got to screen agents. You can't just go out and hire people helter skelter. And as far as construction, we obviously have one big project here in New York, but I don't think you have a lot of building that comes out of it. So I don't really see a lot of positives to offset the clear negatives.

GHARIB: What about the dollar? I saw someone saying that this ends the golden epic for the dollar. What do you say to that?

BRUSCA: I think that's only partially true. It's true the US economy is going through a difficult period. We'll go through a more difficult period, but so are all the other economies of the world. We still have the most liquid capital market and we still have the strongest institutions in the world, financial institutions, market institutions. So I don't confidence is going to be undermined dramatically in the dollar or in the US economy. The dollar could go down for a lot of other reasons. But I don't think this will be a determinative factor.

GHARIB: We didn't see the markets open today. They may open later on this week. When they do open, the financial markets, what kind of reaction do you think that we can expect?

HORMATS: Well, that's interesting. We've had problems in the overseas markets. We've seen declines, losses of confidence there. I think you're going to see a lot of sorting out because there are some industries, like the insurance industry, that will probably have problems, the airline industry which will have some problems. But overall, there may be some selling, but I don't think it's going to go on for a long time. I really think that the bottom line is that America is still is a very strong economy. There's a lot to recommend this. We have solid institutions. The central bank is doing what it needs to do to keep things strong and stable here. And remember, when you talk about the dollar sliding, let's remember that we had that Robert Rubin, strong dollar policy that was in effect for so long. It's like somebody was on a diet by losing 10 pounds month after month after month. At some point, you got to go off that diet. And so I think it's time perhaps for that policy to change anyway and I think we should be careful about attributing that to these times of terrorist incidents..

GHARIB: Let's look more at the bigger political situation. I don't want to sound alarmist. But if for any reason this whole terrorist attack escalates into a war-like type situation, what could that mean for the financial markets?

BRUSCA: Well, that would be very troublesome for financial markets for a variety of reasons. One because it would continue the uncertainty that people feel now. Second, it's in a part of the world that is very volatile anyway. It's in the Middle East or maybe Afghanistan and you run the risk of a major period of turmoil there leading to interruptions in the supply of energy. The odds of that are not enormous but the risk nonetheless grows the longer this exists and the more people who get killed in the process. And that is a risk to the economy.

GHARIB: Let me pull it back home. What can we expect from the Federal Reserve, from the White House at this juncture, short-term and long-term? Are we going to see a more aggressive monetary policy? Are we going to see more aggressive fiscal policy?

BRUSCA: Well, here's-I don't think you want it think in those classic terms. I think that what the Federal Reserve wants to do is what it's doing- providing liquidity to stabilize financial markets, to stabilize those institutions. I think the question about easing monetary policy is a totally separate issue and I think we need to divorce it from these kinds of events. If the Fed people begin to feel, talking to corporate executives, that this would be helpful they're undoubtedly going to be willing to be more aggressive with monetary policy. Fiscal policy is a different thing, as we've talked about. Defense spending will be of a special variety to handle this kind of problem. I don't really think we think in those terms. We think of a proper policy response to these events.

GHARIB: Bob, what do you think?

BRUSCA: Well, I think that's right. I agree with Robert. And I think that on fiscal policy the one thing we have gotten hung up on is this lock box. And I think what we will now be willing to do to a greater degree is spend some of the Social Security surplus to create fiscal stimulus and not sequester the money, not hold the money back. That'll be very important. And conceivably a tax cut to strengthen investment, capital investment, not a cut in the capital gains tax that's been proposed, but a real tax cut that could generate capital investment or some additional tax cut for lower income people.

GHARIB: All right, we just have a few seconds left. I want to end with you. Bob, you were in the World Trade Center in '93 when it went through that bombing. Your business operated from there. From your experience on that, what did you think this whole incident nationwide will do about changing the way American businesses do business?

BRUSCA: I think we'll see more security put into place. I think there will be some restrictions on our freedoms. But I would really urge policymakers to look carefully at those things that make this economy strong. Freedom is important. Capitalism needs that freedom.

GHARIB: OK, thanks gentlemen. Thanks very much. And we've been speaking with Robert Hormats of Goldman Sachs International and Robert Brusca of Ecobest Consulting.

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LINDA O'BRYON: Financial markets elsewhere in the world were open for business today. The worst reaction came in Tokyo, where the market slid below 10,000 for the first time in 17 years. We have two reports. From Paris, Paul Miller looks at reaction on European markets. But we begin in Tokyo, where, as Lucy Craft reports, the markets are about to open for trading on Thursday.

LUCY CRAFT, NIGHTLY BUSINESS REPORT CORRESPONDENT: For the second day in a row trading will begin a half hour late and to reduce volatility the limit on price fluctuations of individual shares will be cut by half. Observers say the government is only slowing the inevitable plunge in Tokyo's stock prices, with a slew of sell orders expected to roil the stock exchange Thursday. Wednesday's nearly seven percent decline left the market at a 17 year low and savaged even the bluest blue chips like Sony (SNE) and Toyota (TM). Tokyo's stock market has now shrunk to one quarter of its peak value. Still, Japan's leading financial daily, "The NIKKEI," forecast the economic effect of this week's tragedy would be limited given the already dire state of the economy and uncertainty about Prime Minister Koziumi's ability to execute needed reforms. The newspaper predicted real GDP will decline this fiscal year by about one percent. Lucy Craft NIGHTLY BUSINESS REPORT Tokyo.

PAUL MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Today's newspaper headlines were dire, but for European markets it seemed old news. Prices on the Paris Bourse and other markets rallied in volatile trading. Most closed up, although they finished below where they were before the terrorist attacks.

PATRICK ARTUS, CHIEF ECONOMIST, CDC-PARIS: What's interesting is that there is no panic at all in the markets. I mean what we have seen is a real panic yesterday, the DAX falling by 11 percent. And today there is a more, I think realism and people are trying to think about the real consequences.

MILLER: One consequence: European's central bank promises of enough liquidity to help keep the world economy functioning. Investors liked that and the possibility that the ECB would cut interest rates. In the relative calm, the dollar rose against the Euro and the prices of gold, bonds and oil went down. This was not a normal day, however. Europe's financial industry is in shock and restricted by the New York closures. One analyst said, "We aren't really working today and we shouldn't be." And Europeans are still concerned about two possible consequences of the attacks, both of which are beyond their control. Europeans worry that the U.S. economy will be badly affected and that there will now be a long period of international tension, which will drive up commodity prices. Paul Miller for NIGHTLY BUSINESS REPORT, Paris.

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LINDA O'BRYON: As investors wait for the financial markets to reopen in the United States, what role does the government play in assuring an orderly return? Alice Rivlin has extensive experience in public policy, including her service as Vice Chair of the Federal Reserve Board of Governors. I talked with Ms. Rivlin this afternoon and began by asking her how the Federal Reserve prepares for this kind of disaster.

ALICE RIVLIN, FORMER VICE CHAIRMAN, FEDERAL RESERVE BOARD: Nobody's ever ready for something like this. But actually I think our banking system is in pretty good shape, in part because of all of the effort that went into preparing for Y2K, which turned out not to be a disaster. But it involved simulating a lot of disasters, what would happen if the computer system of a big bank or a big brokerage house or both went down? Would this affect other computer systems and how to protect them so that they wouldn't. And here we are. It's happened.

O'BRYON: And yet for Y2K we had years of preparing for the worst. This week's incidents certainly were totally unforeseen.

RIVLIN: That's right, but we did it for Y2K so we were prepared for this, I think.

O'BRYON: Well, the Federal Reserve has been issuing statements this week that the terrorist attacks won't threaten the nation's banking system, that it is prepared to provide more money as needed. What role does the Fed have in the liquidity issues?

RIVLIN: Well, it's quite simple. It's saying to the banks you can borrow from us and go ahead and do that. Now, the banks knew that, but an additional statement saying we are here, we're prepared to lend you as much as you need to keep the banking system functioning, that's what the Fed did.

O'BRYON: Well, beyond providing liquidity, what role does the Fed have in urging investment bankers, for example, to keep markets on an even keel when they reopen?

RIVLIN: Well, I don't know that it will play much of a role there. What happen in the markets when they reopen will depend on a lot of things about how the investors feel about the future. But the role of Federal Reserve is simply let's keep everything functioning normally, and so far it has. It is remarkable that this huge financial installation went down and we didn't have disruption of the payment system, national or international, or a run on the banks. People have confidence in the banks.

O'BRYON: Should the Federal Reserve lower interest rates immediately?

RIVLIN: Oh, I don't think so. That's a judgment call. The Federal Reserve has been lowering interest rates, as you know, since last January. Another down move would be appropriate economically but I don't think it would be necessarily able to do it in response to the disaster.

O'BRYON: Do you think it will have an impact, though, considering that the last cuts have not had the kind of impact that was hoped for?

RIVLIN: Well, they haven't had yet. Remember that when the Fed was moving up it didn't seem to make a difference for a long time and then all of a sudden wham, it did. Interest rate cuts take effect over a long period. But we're in a new situation now. Nobody knows exactly what the impact of this disaster will be on the economy. The main question is what will consumer and investor psychology be like, and I, for one, am quite optimistic. I think this will be a terrible disaster but not a major economic event.

O'BRYON: All right, well, thank you very much, Alice Rivlin.

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PAUL KANGAS: Commercial air travel in the United States remains in chaos tonight. The FAA says a limited number of flights grounded yesterday can continue to their final destinations, but that's it. As Diane Eastabrook explains, the grounding is taking a toll on airlines at a time when they can least afford it.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Analysts say the terrorist attacks that have grounded planes and passengers have so far cost U.S. airlines roughly $300 million in lost revenues. But there is speculation once the skies reopen, some skittish travelers won't return to them.

UNNAMED TRAVELLER: Definitely, you know, I have some reservations. I mean you think twice now.

UNNAMED TRAVELLER: I got a trip Sunday morning. I'm nervous. I'm going to Newark.

EASTABROOK: All of this could not come at a worse time for the airline industry. Passenger loads are down because of the sour economy and fuel prices are up. The AMEX Index of airline stocks is down more than 30 percent this year compared to the S&P 500, which is down roughly 17 percent.

JONATHAN SCHRADER, AIRLINE ANALYST, MORNINGSTAR: I think near term you're going to see a large decline in these stocks, particularly United (UAL) and American.

EASTABROOK: Airlines are also facing increased public pressure to beef up security at airports and on airlines. Some industry watchers say that could cost carriers hundreds of millions of dollars.

AARON GELLMAN, PROFESSOR, NORTHWESTERN UNIVERSITY TRANSPORTATION CENTER: The government has some culpability here and the government should bear some of the costs. I don't know what will happen, but that, I think, is an argument the airlines will make, and I think it may be a sustainable argument.

EASTABROOK: Analysts say the fallout from the hijackings will very likely impact the earnings of U.S. airlines through the end of this year and possibly through the middle of next year, as well. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.

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LINDA O'BRYON: For individual investors the question is how to react to yesterday's events. As Jeff Yastine reports, many people are pondering that question and some experts are offering advice.

JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: It has been a busy day for financial planner Harold Evensky. He's been on the phone with clients all day, but he's advising them to sit tight, as tough as that might be.

HAROLD EVENSKY, FINANCIAL PLANNER, EVENSKY BROWN & KATZ: Our best guess right now is when the markets open there's likely to be a substantial drop, a panic drop. We're saying that we don't think there's any fundamental basis for that. The oil fields didn't get wiped. It wasn't like Silicon Valley was destroyed. It was tragic beyond imagination, but it's not something to effect the economic functionality of the world.

YASTINE: In the surprise Japanese attack on Pearl Harbor in 1941, the Dow, already in a broader down trend, sold off by more than eight percent. But it rallied back to nearly the same level one month later before resuming the broader trend lower. In President Kennedy's 1963 assassination, the Dow sold off by nearly three percent, but a rally started the following day as a reassured nation continued its economic expansion. Either way, market watchers say investors who want to be the first to sell after a catastrophic event are following a poor strategy.

RAYMOND FISHE, ECONOMICS PROFESSOR, UNIVERSITY OF MIAMI: They actually pay a very big price when they do that because there's going to be somebody at some price that will take them off their hands. But that's a big liquidity hit that you face and then later on you start thinking well, geez, the world didn't end. YASTINE: Jeff Yastine, NIGHTLY BUSINESS REPORT, Miami.

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PAUL KANGAS: When stocks eventually do resume trading, as we've said, no earlier than Friday, no later than Monday, the challenge will be digging the financial district out from under the rubble. New York Bureau Chief Scott Gurvey looks at what traders will