We are all reeling here in the Southeast from Wednesday's tornado outbreak. If you haven't seen just how many touchdowns we had, take a look at this real-time map on MSNBC's website.
Alabama was hardest hit. Lesley McClure, our regional executive in the Birmingham office, penned a note to members of the branch's board of directors outlining the Fed's response to the tragedy:
"First let me say that I hope each of you, along with your families and friends, are safe. I know everyone is consumed with coping with the aftermath of the disaster, but I wanted to reach out to you to let you know what the Fed is doing now and what we can do to assist in the future.
"The Federal Reserve's response to a disaster is twofold—short term and long term. Our short-term response does not provide relief for critical needs such as housing, food, etc. However, our ability to put cash on the ground is key as power outages create situations where retailers may only be able to accept cash due to the inability to conduct electronic payments. Psychologically, access to cash is very important. The Atlanta office extended its cash ordering hours on Thursday and did receive several late cash orders. They are committed to being available for weekend payouts if needed.
"For longer-term needs, we have staff in our Community and Economic Development group with experience in supporting the rebuilding of homes and the challenges associated with financing, under-insurance, etc. They can advise local governments on what to expect regarding housing development and infrastructure in the wake of disaster. They can work with non-profits to educate them on how to establish information centers for families seeking assistance with rebuilding."
Although much less important at this stage, we are monitoring the impact from an economic point of view. Economic disruptions will be significant in the short term as power and water services remain interrupted in several areas.
Damage from the region's tornado outbreak April 27 will run into the hundreds of millions of dollars and could cross the $1 billion mark, according to first-take estimates from the insurance industry. That said, it will be weeks before anyone can deliver reliable estimates. Part of the reason for uncertain estimates stems from the fact that many areas have experienced extended power outages, which could mean that firms without physical damage may be able to collect on policies that cover business interruptions.
Historically, the economic pattern of disasters sees initial losses as affected areas experience a slowdown in activity. The duration of the slowdown is tied to the extent of damage in economically important areas, and the duration of loss of services such as power and water. Recovery is driven largely by two factors—physical rebuilding of damaged and destroyed infrastructure and replacement of capital and household goods. As insurance checks are distributed and government aid is delivered, the economic recovery begins to take hold. Rebuilding infrastructure and replacement of capital and goods can stretch out several years, depending on the extent of the damage.
As our thoughts and support go out to our friends and neighbors that are coping with these events, we'll continue to reach out to affected communities and monitor the economic impact of the April 27 tornadoes.
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department