Hacked! When will we start to defend America’s computers?

by Kevin D. Freeman on June 29, 2011

Richard Miniter is the author of the New York Times best-seller “Losing bin Laden: How Bill Clinton’s Failures Unleashed Global Terror” and of “Mastermind: The Many Faces of the 9-11 Architect, Khalid Shaikh Mohammed.” Miniter’s website is www.richardminiter.com.

Last week (June 23), Miniter published an article titled HACKED! When will we start to defend America’s computers? His piece documents numerous instances of Economic Warfare via cyber methods. His conclusions:

Beyond spying, China or terrorist groups may also be waging what a recent Pentagon report calls “financial terrorism and economic warfare.”

This comes on the heels of an earlier Pentagon study (“Economic Warfare: Risks and Responses”) that speculates that the 2008 market meltdown — which cost American investors some $13 trillion in wealth — was worsened by offshore naked short-selling raids on Wall Street firms, particularly Bear Stearns and Lehman Brothers. While the sources of those raids cannot be traced, a Pentagon study suspects “economic warfare” by nations like China or groups like al-Qaida.

In response, the House version of the National Defense Authorization Act directs the military to find and plug the holes in the nation’s financial and security networks.

The vulnerability of Wall Street’s electronic trading and settlement system to foreign manipulation is shocking.

Despite 2008 regulatory reforms, settlement failures are rising again. A settlement failure is what traders call it when buyers or sellers fail to provide the agreed-upon stock or cash to complete a transaction. Persistent settlement failures in exchange-traded funds (ETFs) have been as high as $7 billion per day, according to The Economist. ETFs are entirely computerized, with all of the perils that implies. After the “flash crash” of May 6, 2010, which was largely driven by computerized trading, the U.S. Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues reached this ominous conclusion: “Even in the absence of extraordinary market events, limit-order books can quickly empty and prices can crash” because of computerized high-frequency and algorithmic trades.

Imagine a computer virus designed to wipe out your retirement savings and sink our economy.The flash crash may have been a test run.

It is high time for the federal government to trace these cyberattacks and strengthen our computer networks, both federal and financial, against an electronic 9/11.

We agree with his conclusions and have made strong efforts to get a proper response from our policymakers and defense establishment.

All posts Copyright (c) 2011 Kevin Freeman, All Rights Reserved

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