September 11 Commission Report - Gnostic Liberation Front

ecause of system redundancy, mirroring, and extensive back-up centers. What did
fail was the telecommunications infrastructure which prevented buyers and sellers of
securities from making “subsequent” trades. Hence, the settlement and clearing data
should have been “whole,” and a securities buy record and sell records should have
been able to be matched in the setllement process.
There is one last element of the settlement process that was disrupted by the attack on
the WTC. The actual certificates for the securities were destroyed.
“The difficulty with lost certificates was dramatically demonstrated during the September
11,2001, tragedy when thousand of certificates were destroyed in vaults maintained by brokerdealers.”
[Federal Register / Vol. 67, No. 151 / Tuesday, August 6, 2002 / Notices]
“Settlement: The Central Securities Depository (CSD) implements the settlement instructions:
securities are delivered, and funds paid. The depository controls the actual securities, and so can
register and transfer ownership. …. However, some trades, such as mortgage-backed securities,
still require physical movement of paperwork. The deal is not complete and “irrevocable” until
this is done.” [Harvard Research Group Experience- Expertise- Insight- Results Harvard Research
Group, Inc. Copyright © 2003 Harvard Research Group]
(There will be some readers who observe that securities no longer require ‘physical
certificates,’ and in many cases this is true. In fact, many US government securities
are managed that way. Unfortunately, the certificates that were at the core of this plot
had to be physical, because they were originally created for cross-border transactions,
and the evidence cited from the Federal Register indicates they did indeed exist. One
internet blogger argued that if the certificates needed to be destroyed, that would not
warrant destroying the whole complex. In fact, all indications are, including on-line
testimonial from a Garbon employee, that the certificates were held in vaults in the
basement of the Tower.)
An overview of this situation is worth providing:
Illegal trades were reported on September 11, which had to be government
securities trades, as the stock markets had not yet opened.
Computers at Cantor Fitzgerald are known to have hosted programs that simulate
attacks on US securities.
These programs should have been operational on September 11 as part of a
broader synchronization of Department of Defense War Games.
The terrorist attack on the financial center of the US failed to bring down any core
trading system or Cantor Fitzgerald’s eSpeed trading system.
The only trading system that reported problems was the securities clearing and
settlement system, which publicly attributed its problems to communication
failures with the Bank of New York.
As will be demonstrated in Section 8.1 Federal Reserve and the Elimination of
Regulatory Control, the Clearing process was hung up for weeks on an inability to
“match”, although the matching data is reported to have been whole. This issue
has never been publicly addressed in any article or speech by the Federal Reserve,
and can only be identified by the ‘orders’ issued by the Federal Reserve in the
aftermath of September 11. This ‘matching’ had nothing to do with the Bank of
THE SEPTEMBER 11 COMMISSION REPORT Page 188