There are rumors that one of the functions of Hurricane Sandy was to create a cloak behind which the Federal Reserve could be taken down. Here is one news story that demonstrates that there was in fact a disruption in service at the Fed. We’ll be asking Archangel Michael for his view of the matter tomorrow.
Hurricane Sandy disrupts Federal Reserve operations
New York Federal Reserve suspended operations for a day as hurricane battered eastern US; temporary measures taken to support banking in face of disruptions to power, communications and staffing
Central Banking | 31 Oct 2012
The Federal Reserve and regional Federal Reserve banks suspended some operations and undertook temporary measures to allow the financial system to continue to function as a hurricane battered the eastern US on October 29 and 30.
The Federal Reserve Bank of New York, in one of the worst affected areas, was open on October 29, but suspended open market operations the following day. The settlement of transactions that took place on Monday was postponed until today (October 31), and purchases of Treasuries and agency mortgage-backed securities scheduled for October 30 were cancelled.
Hurricane Sandy was a tropical storm that originated in the Caribbean and moved up the eastern US, striking New York and the surrounding area late on October 29. Parts of the US were left without power and New York experienced major flooding. Scores of people were killed.
The Federal Reserve issued a joint statement on October 30 with the Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation setting out contingency measures for financial institutions affected by the hurricane. The Fed called on banks to “work constructively” with borrowers affected by the hurricane. “The agencies recognise that efforts to work with borrowers in communities under stress can be consistent with safe-and-sound banking practices,” the statement said.
Supervisory reporting requirements disrupted by the hurricane were adjusted so as to not impose unfair penalties. Federal regulators agreed to “expedite” any request to set up temporary banking facilities in affected areas as “banks face power, telecommunications, staffing and other challenges in re-opening facilities after the hurricane”.
Other Federal Reserve banks were also affected. Cash operations at the Philadelphia Fed and the Baltimore branch of the Richmond Fed were suspended, and the Boston Fed opened with only essential staff on October 30. Normal cash operations resumed today.