Vviewpoints
DOI: 10.1145/1735223.1735238
Viewpoint
Can iT Lean
against the Wind?

The sePTeMBer 2009 Communi- cations Editor’s Letter “The Financial Meltdown and Computing” by Moshe Vardi suggested a link between the financial crisis of 2008 and computing. He is correct to suggest this connection. Information technology (IT) has enabled ever-increased speed and global reach for financial products. Financial institutions in the U.S. and elsewhere have created and deployed complex, structured financial instruments. At the peak of the bull market, the seemingly endless promise of fancy financial products drove the markets to new heights. What went wrong, and what role did IT play? This column cannot provide all the answers, but it offers some recent history and a lesson worth remembering.

the Role of it in financial markets
Before the financial meltdown of late
2008 two important events provided
a glimpse into the role of IT in the fi-
nancial markets. The first was the Sep-
tember 11, 2001 terrorist attack on
the World Trade Center. The attack
destroyed a prominent symbol of Wall
Street. It also destabilized the finan-
cial clearing and settlement systems of
major banks located nearby. Foreign
exchange settlements in U.S. currency
collapsed, which could have created a
global financial calamity. However, in
part because of remedies applied dur-
ing the Y2K crisis, emergency back-up
systems in the IT infrastructure prevent-
ed the worst. Within three hours, disas-
ter recovery systems located abroad
took over from New York to handle all
U.S. currency transactions, and clearing
and settlement for U.S. currency was up
and running.