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Officials say financial system is protected

Officials believe there are sufficient safety mechanisms to ensure that any terrorist attack on the U.S. financial system can be weathered in much the same way the system handles hurricanes and other disruptions.
/ Source: The Associated Press

Officials believe there are sufficient safety mechanisms to ensure that any terrorist attack on the U.S. financial system can be weathered in much the same way the system handles hurricanes and other disruptions.

Millions of dollars have been spent to develop redundant systems that could take over after a terrorist attack to make sure that bank customers are able to continue to cash checks, make deposits and withdraw money from automatic teller machines.

Many of those systems have been put in place since the Sept. 11, 2001, attacks in the heart of the financial district in New York City.

Federal Reserve Chairman Alan Greenspan told Congress recently that his agency, which oversees the country’s biggest banks, continues to upgrade systems to deal with the “fortunately low but still deeply disturbing possibility” of a new terrorist attack.

Those upgrades were getting extra scrutiny following the government’s warning Sunday about possible al-Qaida terrorist attacks against financial institutions in New York City, Washington and Newark N.J.

The facilities listed included the New York Stock Exchange and financial giant Citigroup in New York, Prudential Financial in Newark and the headquarters of the 184-nation International Monetary Fund and the World Bank in Washington.

The list of potential targets did not include the Federal Reserve in Washington, the nation’s central bank and lynchpin of the financial system, or the Bureau of Engraving and Printing, supplier of the nation’s paper currency.

But police officials said extra security was being provided to those two institutions as well as the IMF and World Bank.

Officials at all of the financial institutions stressed they believed they had sufficiently strengthened systems to guard against major disruptions to critical operations.

Treasury Department spokesman Rob Nichols said his agency had been closely coordinating efforts with the Department of Homeland Security “as well as other state, federal and local regulators to strengthen and protect our critical financial infrastructure.”

Those moves have included improving communications systems connecting major financial institutions and conducting numerous drills to test backup systems in the event of a terrorist attack.

Blackout, hurricane weathered
Federal Reserve officials noted that during the power blackout in August 2003 that affected more than 50 million people, the nation’s financial system was able to keep operating, just as it did when Hurricane Isabel hit the East Coast later that year.

They credited the backup systems put in place after 2001 and the upgraded computer systems that were installed at a cost of millions of dollars to deal with the Year-2000 date switchover.

The Fed has refined the procedures it used after the Sept. 11 attacks to monitor payment flows between banks and, if necessary, flood the financial system with money to make sure that temporary disruptions in those flows don’t cascade into serious problems.

The Fed provided a record $45 billion in short-term loans to the banking system in the days right after the 2001 attacks to ensure that all banks had the resources needed to meet withdrawal demands.

Fed officials have had backup plans going back to World War II and the Cold War for ways the central bank would continue operating in the event of attack.

Officials said contingency plans also were in place for threats to the Bureau of Engraving and Printing. Stockpiles of paper currency are not stored at the Washington plant, but rather shipped to the Fed’s 12 regional banks for release as needed into the nation’s money supply.

Fed officials refused to discuss what types of extra security might be employed for the regional banks, in New York, Boston, Philadelphia, Richmond, Va.; Cleveland, Atlanta, Chicago, Minneapolis, Dallas, St. Louis, Kansas City, Mo.; and San Francisco.

The officials said, however, that all Fed operations would be open for business as usual Monday.

The IMF, which supplies emergency loans to countries in financial distress, and the World Bank, the world’s biggest source of development loans to poor nations, said they have backup plans to ensure their operations can continue in case of disruptions at their Washington headquarters.