updated 9/15/2008 8:43:43 PM ET 2008-09-16T00:43:43

As the financial equivalent of a hurricane swept through Wall Street on Monday, the New York metropolitan area braced for economic damage in the form of lost jobs, further plummeting tax revenues and more trouble in real estate markets.

The bankruptcy filing by Lehman Brothers Holdings Inc., a sudden takeover of Merrill Lynch & Co. and uncertainty about American International Group Inc. came together in a way that was certain to punch more holes in the region's economy, which was already suffering.

"Today is a sad and stunning day," New York City Comptroller William Thompson Jr. said. "Thousands are losing their jobs, many are unsure about their future. When people think of Wall Street, they tend to focus on positions like investment bankers and traders, but we also must remember all the assistants, the back-office workers who find themselves suddenly out of work."

New York's economy relies significantly on Wall Street. For every billion dollars in profits, the city gets $70 million in direct taxes and enjoys even more revenues indirectly from money spent here by financial employees. It is also said that every Wall Street job helps create two or three other jobs, meaning the reverse effect could also be true as the folding of Lehman could mean some 12,000 jobs wiped out, officials said.

Mayor Michael Bloomberg, a former CEO who worked on Wall Street, cautioned against a "cry wolf" reaction and tried to put on a positive face during a City Hall news conference. Bloomberg canceled a trip to California to deal with the fallout from the Wall Street crisis, speaking with business leaders around the globe in recent days.

He described the situation as "not good, but not calamitous," but also did not rule out eliminating a package of property tax relief that was included in this year's budget.

"We shouldn't kid ourselves and think that there aren't going to be some more very difficult decisions ahead," he said. "There will be."

The city, he noted, had foreseen some economic troubles and long ago began taking steps like across-the-board agency cuts.

The potentially devastating consequences were expected to reach far outside Manhattan and across state lines into New Jersey and Connecticut suburbs that are home to many of the wealthy executives who work in New York.

Gov. Jon Corzine sounded a dire tone in an interview on CNBC and during an appearance in New Jersey later in the day. He has already carried out drastic budget cuts and worried about more problems down the road in a state where at least 25 percent of the economy is Wall Street-dependent.

Corzine, a former CEO of Goldman Sachs, believes the federal government should provide some sort of relief to deal with the fallout, but that idea did not appear to have much momentum in Congress after heavy federal involvement in the takeover of Bear Stearns this year and the seizure of Fannie Mae and Freddie Mac last week.

In Hoboken, N.J., hundreds if not thousands of residents work — or worked — for the two Wall Street brokerages that surrendered to the credit crisis over the weekend. Mayor David Roberts said the city is bracing for the fallout from large numbers of people who suddenly can no longer make mortgage payments or spend money in restaurants and bars.

"Having so many young people lose their jobs is certainly cause for concern," he said.

In Connecticut, some 15 percent to 20 percent of the state's personal income tax revenue comes from Wall Street bonuses, according to Joe McGee, vice president of public policy with the Business Council of Fairfield County.

"Clearly there will be a sizable portion of Lehman Brothers employees who live in Fairfield County," McGee said. "So clearly this will have an impact on our economy and on income tax collections."

Sales tax income and home values also could suffer throughout the metro area, economists said Monday. New York City's real estate market has avoided the meltdown that has happened elsewhere, but has shown some cracks in recent months.

"We're talking about significant job relocation, significant loss of assets and turmoil in the financial markets," said Donald Klepper-Smith, chief economist for DataCore Partners in New Haven and chairman of Gov. M. Jodi Rell's Council of Economic Advisers. "That sequence is devastating."

The impact of job losses at Lehman Brothers, Merrill Lynch and AIG could rock the Manhattan office market, arguably the strongest one in the nation. Together the trio occupy 9.5 million square feet of office space, including Lehman's Midtown headquarters, where it moved after the Sept. 11 attacks.

Wall Street's woes were worrying many in Atlantic City, the seaside gambling resort that's heavily dependent on financing for expansion projects and paying down massive amounts of debt.

Already, two massive casino-hotel projects have been delayed by the credit crunch. The prospect of even tighter financing — not to mention thousands of suddenly unemployed stock brokers and investment bankers — is even more cause for concern.

The turbulence in the financial industry has already started to take a toll in luxury spending, though New York City stores have seen business buffered by frenzied buying from swarms of foreign tourists.

That could change if foreign consumers also retrench amid a slowdown in overseas economies. Last month, Saks Inc., which operates its flagship Saks Fifth Avenue store on Fifth Avenue, offered a downbeat forecast for the second half of the year and told investors that its high-end consumers are now starting to pull back.

The latest crisis, says New York-based retail consultant Robert Burke, doesn't "put Wall Street people in the mood to feel secure about the future. So much of luxury shopping is based on a psychological outlook."

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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