Wednesday, September 08, 2004

3 years already? A look back...FRB: Testimony, Olson--Protecting the financial infrastructure--September 8, 2004

FRB: Testimony, Olson--Protecting the financial infrastructure--September 8, 2004

Can you believe it has been three years since the tragic events of 9-11-2001? You remember where you were and what you were doing. You remember who you watched the drama unfold with. You remember the panic-filled phone calls from friends in NYC or DC, the emails, the fear, the sadness. We all do.

At today's meeting of the House Congressional Committee on Financial Services, Fed Governor Mark Olson looked back at the Fed's response to the attacks (a response which was text book in its execution). He also lays out the steps that have been taken since that fateful day to improve the safety of the financial infrastructure.

In his words:
"Within weeks of September 11, we initiated a self-assessment of our contingency arrangements across the Federal Reserve and embarked on forty initiatives, which we classified under five broad headings:

1. Ensure continuity of Federal Reserve operations.
2. Ensure market liquidity during a crisis.
3. Ensure effective communications and coordination during a crisis.
4. Improve resilience of the private-sector financial system infrastructure.
5. Improve resilience of the telecommunications infrastructure supporting critical financial services"

Many of the changes involve geographical diversity and planned redundancies to ensure the Fed's operations can continue. Additionally improved cooperation between various financial institutions (both international as well as domestic) has been planned.

In the event of an attack, there are now more concrete plans of how to rebound. For instance, economically we have seen increased liquidity does help to soften the blow. This liquidity is important and several steps have been taken to ensure the Fed's ability to provide the necessary infusion is not unduly hampered by disasters (natural or man-made). From an operational perspective, this may be as simple as to determine what "critical" lines of communication must be restored immediately.

Interesting and important for all. Necessary for those in any Institutions or Money and Banking class!

BTW you can still read some of my comments on 9-11 from the page that I made last year to commemorate the tragic events. While not financial, I would especially recommend you read some of the first hand accounts that were in the newsletters that followed the terrorism attacks.
(be forewarned, some of the links no longer work, I will try to update some of them later)

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