(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Christopher Swann
NEW YORK (Reuters Breakingviews) - Mother Nature is making her mark on the market yet again. Days after a rare earthquake shook Wall Street a more serious disturbance looms in the form of Hurricane Irene. The storm may still fizzle out. But it’s heading for a region with $12 billion of daily economic output and could cripple finance’s capital when investors are already jumpy.
It’s been decades since the densely-populated northeast has suffered a direct hit from a hurricane. So judging the region’s readiness is almost as difficult as predicting the intensity of the storm. Still New Yorkers can look back on some grim precedents. A storm in 1821 caused a 13 foot surge in water levels and flooded the southern tip of Manhattan. And when a category 3 storm drowned the city in 1938 it knocked out electrical power and a new subway line. A storm of that magnitude would cause $40 billion of damage in the city alone if it hit today, according to government estimates.
Irene may not match such feats. But even a less furious storm could be enough to bring New York’s public transport system and airports to a standstill. Heavy flooding could take parts of the subway out of commission for weeks -- consigning New York’s financial minions to a period of prolonged telecommuting or forcing them into backup facilities.
Even assuming Wall Street’s emergency plans hold up, Irene threatens another blow to confidence at a sensitive time. The torrent is set to sweep from North Carolina up towards Boston -- a region that accounts for roughly 20 percent of economic output, Moody’s Analytics calculates. Aside from lost production, cleaning up the mess could place additional strains on government finances. House Majority Leader Eric Cantor has already said any federal spending will need to be offset by cuts in government expenditures.
And it goes without saying that a major natural catastrophe does no good for insurers still getting back on their feet after the banking tsunami of two years ago. The value of insured coastal properties in New York State alone is $2.3 trillion, the Insurance Information Institute calculates.
Come Monday doom-mongers may look silly. Even so, with the U.S. economy sputtering, the nation can ill afford even a temporary shutdown of such a pivotal region. And financial markets have recently been unsettled by far lesser events. Investors should brace for a turbulent week.
-- Hurricane Irene approached North Carolina on Aug. 26, as tens of thousands of people evacuated East Coast cities including New York.
-- Eqecat, a company that helps the insurance industry predict disaster damage, said Irene’s forecast track represented “one of the worst-case scenarios” for the United States. It was one of the biggest storms to threaten the northeast in decades.
-- Irene weakened slightly early on Aug. 26 -- to a Category 2 hurricane from a Category 3 on the five-step Saffir-Simpson scale -- but still was packing winds of up to 110 miles per hour. Irene will be the first hurricane to hit the U.S. mainland since Ike pounded Texas in 2008.
-- New York Mayor Michael Bloomberg said the United States’ most populous city was bracing to experience at least tropical storm conditions and flooding starting on Sunday from Irene, which could hit Long Island as a Category 2 hurricane.
-- Police in New York were positioning 50 launches at station houses in low-lying areas and the police department’s Special Operations Division had another 33 boats plus several helicopters ready to rescue if needed, the city’s Mayor Bloomberg said on Aug. 25.
-- Reuters story: Threat of Irene exposes New York’s vulnerability
Editing by Rob Cox and Emily Plucinak