New York Terror Plot: Why Target the Fed?

Daniel Gross on the damage that could have been done.

Andrew Gombert, EPA / Landov; inset: Getty Images

Talk about a plan to End the Fed. The Justice Department on Wednesday indicted Quazi Mohammad Rezwanul Ahsan Nafis, a 21-year-old Bangladeshi national who lived in Queens and who was allegedly caught red-handed trying to blow up the New York Federal Reserve Bank.

The complaint tells a compelling, quick narrative. The plot started in July. Nafis, who had come to the U.S. to wage “jihad,” tried to enlist someone in his plans to harm Americans—and it happened to be an FBI informant. His plan quickly evolved from wanting to “attack and kill a high-ranking government official” into something larger. The informant introduced Nafis to a guy who was supposed to be an al Qaeda contact, but who was actually an undercover law-enforcement officer. Nafis considered the New York Stock Exchange as a target, and scoped out the area on Aug. 9. He asked for a “big car with lots of fruits and vegetables in there which can blow up the whole New York Stock Exchange building.” By late September, however, he had shifted tack, and said that “he was considering attacking the Federal Reserve Bank instead of, or in addition to, the New York Stock Exchange.”

On Oct. 12, when Nafis and the undercover agent transported “what NAFIS believed to be explosive material to the Warehouse” (in 20 50-pound bags), Nafis said he changed his mind. “I decided to attack the Federal Reserve Bank of New York which is by far the largest (by assets), most active (by volume) and most influential of the 12 regional Federal Reserve Banks. New York Federal Reserve Bank implements monetary policy, supervises and regulates financial institutions and helps maintain the nation’s payment systems.”

On Oct. 17, Nafis allegedly assembled the “purported one-thousand-pound explosive device,” armed it for detonation, parked it outside the New York Fed, took a hotel room, filmed a statement, and then tried to set off the bomb with a cellphone. After agents went into the van and confirmed that the detonator had been activated, they arrested him.

The plan never seemed to pose any real danger to lower Manhattan. According to a law-enforcement official who has been briefed on the case, Nafis has no serious al Qaeda connections. And he was never in possession of real explosives.

But if nothing else, Nafis showed a solid understanding of how the U.S. central banking system works. While the Fed is headquartered in Washington, D.C., the New York branch is its nerve center. So in a real sense, striking a huge blow at the New York Fed would likely be more disruptive to the American and global financial system than attacking the Fed’s headquarters in D.C. As the New York Fed notes, it has “several unique responsibilities, including conducting open-market operations, intervening in foreign exchange markets,” and implementing monetary policy. The Fed’s trading desk actually executes chairman Ben Bernanke’s monetary policy—buying and selling securities to influence short-term interest rates. Under the leadership of then-president Tim Geithner, the New York Fed was a key player in the financial crisis. It—and not the Fed in D.C.—was the entity that lent money to AIG and that guaranteed lots of debt issuance in 2008 and 2009. The New York Fed is where banks go to present collateral in order to get credit, and it is often the point of contact for foreign banks and foreign central banks.

But Nafis didn’t understand a couple other things about the New York Fed. First, while 1,000 pounds of material can cause some serious damage, it might not have done much to hurt the New York Fed. A 22-story Italianate limestone and sandstone palazzo, the building, which occupies the full block bounded by Liberty, Nassau, and William streets and Maiden Lane, is like a fortress. Its exterior walls are as thick as those of a medieval castle. On the first floor there’s a huge dining room where New York Fed president William Dudley hosts quarterly off-the-record press luncheons. (It’s like something out of Downton Abbey, only with poorly dressed journalists instead of aristocrats as dinner guests.) When it opened, the New York Fed had “the deepest basement in Manhattan.” The foundation goes extremely deep, the better to support a massive vault.

And it is the contents of the vault that make the New York Fed a potentially appealing target. Taking out the New York Fed’s lower-Manhattan trading systems would have been disruptive and destructive. But contemporary trading systems are redundant – the data is backed up, and there are alternate trading floors around the New York area. It’s the gold that lies in the New York Fed’s vaults that can’t be replaced. The Fed and Treasury keep their own stash of gold there, worth about $21 billion, as the Los Angeles Times notes. But countries, foreign central banks, companies, and institutions from around the world store gold at the New York Fed because it’s a safe place, far away from turmoil and war. The New York Fed itself reports that “almost a quarter of the world’s gold supply is safely stored today in 122 separate compartments.” Damage to that gold, and the concern over its safety, would have done far more to cause global instability than disrupting the Fed’s open-market operations for a few days.

Nearly a century ago, in 1920, a horse-drawn cart blew up at the heart of Wall Street. Beverly Gage documents the deadly blast, which was an attack at the nerve center of the U.S. financial system, in her book, The Day Wall Street Exploded. While the ostensible target seemed to be the New York Stock Exchange and the headquarters of J.P. Morgan & Co., many analysts believed the never-solved crime may have been part of a plan to steal gold from the nearby Assay Office. The severity of that blast was one of the reasons the New York Fed’s building was made into such an impregnable fortress.

The complaint doesn’t refer to Nafis’s interest in the Fed’s gold. But it does include another wrinkle. A key to investigating potential terrorists is to find out who their friends are. In the 1920s, that might have involved tailing suspects to their home. Today, it involves friending them on Facebook. “During the period between July 6, 2012 and July 8, 2012, NAFIS, the CO-CONSPIRATOR and the CHS began to communicate via Facebook, an internet social-media website.”

With Christopher Dickey.