Phone Outage in N.Y.C. Delays Check Clearing

The disruption of AT&T telephone lines in New York City delayed banks' check clearing operations and briefly blocked settlement of wire transfers.

The network failed at 4:50 p.m. Tuesday, when American Telephone & Telegraph Co. switched back to Consolidated Edison Corp. power from its own generators. It was AT&T's second major outage in the New York area this year and its third since January 1990, when the nationwide network went down because of a software foul-up.

Check transportation services were hardest hit as the outage forced New York metropolitan area airports to shut down when their air traffic controllers lost communications lines Tuesday evening.

At Teterboro Airport, in northern New Jersey - from which the New York Federal Reserve Bank transport checks to banks around the country - service was delayed until after midnight. The air traffic control system at Teterboro was back in operation at 1:30 a.m. Wednesday.

|No Major Repercussions'

The Fed said the airport delays did not translate into disruptions for banks. "Our latest read is that there were no major repercussions on float schedules," said Peter Bakstansky, spokesman for the New York Fed.

Most check flights come in the late evening, after the air traffic system was back in service, Mr. Bakstansky said.

Bankers' Alternatives

However, Glenn Miller, vice president of operations of US Check, a private transportation service, said that banks around the country could have lost a day's availability on checks that could not be flown out of the New York area.

But bankers said they experienced little disruption in their operations.

"We redirected a couple of our flights to another Fed," bypassing the New York Fed, said Joanne Nuzzo, head of check services at Bank of Boston.

The Fed Wire and Chips wire transfer systems settled about two hours later than usual - Chips at 7:15 pm and Fed Wire at 8:15 p.m.

"It was a little hairy," said John F. Lee, president of the New York Clearing House Association, which operates Chips.

Some Payments Blocked

Settlement was delayed because the Fed Wire was disrupted between Philadelphia and New York, and between New York and Chicago, blocking Chips payments from First Chicago Corp. and one other major bank, according to a banking source.

The Federal Reserve was able to reroute communications through its backup facility in Pearl River, N.Y. The banks were then able to settle their payments on Chips and Fed Wire. Banks normally access the Fed Wire network through New York.

"This is another one of the aggravations we're constantly piling up here in New York," Mr. Lee said.

Some checks could be transported from other airports, but checks from New York banks could not be diverted, according to Mr. Miller.

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