America's business community and private investors paid tribute yesterday to New York City's claim to be the world's financial capital.
With Wall Street stock exchanges closed and brokerage houses dark, it might have been the day for regional stock exchanges to demonstrate how well they can compete with the Big Board for action.
With New York banks closed, yesterday could have been the time for other banking centers to prove that they could fill needs of major corporations.
But few customers flocked to brokerages around the nation. Trading was extremely slow at the exchanges that remained open in Chicago, Los Angeles, San Francisco and Cincinnati.
And major businesses in need of short-term money fled to Canada, where their transactions caused an immediate increase in the commercial paper rate.
Things were so slow that brokers in the Washington office of Merrill Lynch, Pierce, Fenner & Smith, the largest securities firm in the country, conducted a "lively" two-hour meeting on "projects and plans."
The bsence of stock trading on just one day added up to millions of dollars in aborted or deferred transactions. The New York Stock Exchange alone normally trades more than $500 million worth of shares in a single day. Brokerage firms may have lost more than $5 million in commissions - at least temporarily.
But the absence of electric power in New York had an impact on American business that spread far beyong the market for stocks, bonds and commodities. In some cases, the absence of planned transactions will cost companies money. Day-to-day internal book-keeping at many firms engaged in financial transactions was in turmoil. Some examples:
One Washington bank, which had loaned money overnight to a New YOrk institution, couldn't get it back yesterday. To balance its books yesterday, the local bank had to borrow money on its own and a spokesman said the D.C. bank would demand an extra day's interest payment from the New York institutions.
There was "almost a financial panic" at some major corporations, whose officers had planned to get money in or out of New York banks yesterday, said a spokesman for Commercial Credit Co., one of the country's leading business credit firms.
Pan American World Airways and Trans World Airlines suffered some major disruptions yesterday but expected fairly normal operations today. In order to cut down on nonessential traffic at Kennedy International Airport, for example, Pan Am canceled the Washington-New York part of its flight to Frankfurt, put Washington passengers on the Eastern shuttle and moved them by bus from LaGuardia to catch the New York-Frankfurt takeoff.
In Canada, dealers in commercial paper (short-term unsecured corporate notes or IOUs) conducted what they called a "fire sale." With U.S. sources for quick infusions of money closed, companies flocked to Canada to borrow and pushed short-term interest rates up sharply.
May Department Stores Co., owner of the Hecht Co. in Washington and Baltimore, was roced to cancel plans to sell $50 million of debentures to the investing public. Dow Chemical Co. and a Burmah Oil Co. unit also were blocked from selling new issues.
Riggs National Bank of Washington and commercial banks across the nation were unable to get funds transferred to or from New York, with the Federal Reserve Bank of New York and all of New York's banks shut down. One customer of a D.C. bank was to get a certificate of deposit paid off yesterday at a New York bank now that customer will get one day's extra interest, a new cost to the D.C. bank.
Package deliveries between New York and the rest of the nation's business were halted as United Parcel Service suspended operations in the New York area.
Owners of mutual funds who tried to redeem their shares yesterday were told that the settlement price would be based on closing stock exchange prices for the next full day of trading on the New York Stock Exchange - today if the market is able to open or next Monday.
Companies that were due to make loan payments to New York banks or commercial credit firms yesterday were given an extra day - although many didn't hear about it directly because offices were closed in New York and many forms of communication were disrupted.
Computer experts at banks, brokerage houses and airlines emphasized that records or reservations already stored on discs in their computer systems would not be erased or adversely affected by the electric power failure in New York.
But a spokesman for Bache Halsey Stuart Shields said that work in progress on computer programs when the power failed at 9:34 p.m. (EDT) Wednesday would be started from scratch after the lights were back on.
"I guess New York really is the center, the whole world is closed," said Paul S. Miller, head of the Bache Halsey office in downtown Washington, where most workers were engaged with paperwork and catching upon telephone calls to customers. Bache refused to make any stock trades.
"New York really is a pretty big hub," added Pat Ryan, who specializes in trading over-the-counter stocks in the Washington office of Reynolds Securities. Reynolds relocated from Manhattan to the District some of its policymaking operations for the day and, although customers were being advised to wait for New York exchanges to reopen, the securities firm was placing orders yesterday for a few customers who wanted trades made.
In general, trading in stocks was light among those firms willing to buy or sell. New York commodities exchanges and the Mercantile Exchange in Chicago also were closed but the big Chicago Board of Trade opened on a delayed basis. Most bond trading and key foreign exchange activities were halted, although banks outside New York were dealing directly with their counterparts in Europe.
Norman Freehling, at the Chicago brokerage firm of Freehling & Co., said that while it had been "worthwhile" to be open for business yesterday, volume was "not as much as usual." Midwest Stock Exchange volume added up to only 410,000 shares compared with 1.4 million on Wednesday.
In general, brokers in Chicago said investors were reluctant to buy or sell so long as the New York Stock Exchange floor was quiet. International Business Machines stock was the only significant gainer, up more than $2 a share after posting higher profits. On the downside was Consolidated Edision of New York, the firm which supplies New York's electricity. Con Ed stock was off 75 cents a share in Chicago and down 87 1/2 cents on the Pacific exchange, where it was second most active.
"It looked like it was going to be an exciting day but it turned out to be quiet with no problems," is the way a Securities and Exchange Commission market serveillance staff member described yesterday's public markets.
Most markets that did open waited until after 11 a.m. EDT and stock prices remained unchanged or moved less than a dollar per share, in most cases. The SEC said regional exchanges could open so long as they guaranteed "fair and orderly" markets. Exchanges in Philadelphia and Boston decided to close.
Initially, the SEC itself was in the dark about what was happening in New York. The agency's own regional office there was closed and the Bunker Ramo Corp's computer at Trumbull, Conn., the principal clearing house for quotations, was not being fed by central clearing houses in downtown New York. So it was virtually impossible to monitor trading in Washington.
Options trading was suspended at SEC request because options are tied to trading in stocks. Today should be an active day for stock options trading because options trade on three-month cycles and today is the last trading day for July options. The Chicago Board Options Exchange said it will trade today regardless of what happens in New York.
As for whether the nation's stock markets would have been so totally disrupted if a proposed central market system already had been in place, an SEC official noted that a composite tape listing all exchange trading was not working.
Apparently, there will be no long-term effects of the blackout on airline services. American Airlines, although based in New York, has its operations center and reservations computers in Tulsa, Okla. New York area telephones are answered in Hartford, Conn., which also was unaffected, according to vice president Joseph W. Eaken.
Some real estate transactions, depending on money expected from New York, had to be postponed. Said one Washington real estate broker: "Maybe the power failure will convince the stock exchange and some news agencies to move their shops to Washington."
The broker, who asked not to be identified, said that United Press International had considered a move out of Manhattan several years ago because of recurrent power fluctuations that affected computers and machines. Yesterday, UPI's business wire was silent until after 6 p.m. EDT, although national news moved on other UPI wires.
One likely outcome of yesterday's events, said the Washington broker, would be a new effort by this area's business community to attract financial and other businesses to relocate from New York to the federal city.