The Department of Business and Economic Development (DBED)
of the State of Maryland

November 8, 2002

Jennifer J. Johnson, Esq.
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Attn: Docket No. R-1128

Jonathan G. Katz, Esq.
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
Attn: File No. S7-32-02

Office of the Comptroller of the Currency
250 E Street, S.W.
Public Information Room
Mail Stop 1-5
Washington, D.C. 20219
Attn: Docket No. 02-13

Ms. Christine Tomczak
New York State Banking Board
2 Rector Street
New York, NY 10006

    Re: White Paper on Sound Practices to Strengthen the Resilience of the U.S. Financial System

Ladies and Gentlemen:

On behalf of The Department of Business and Economic Development (DBED) of the State of Maryland, I am pleased to offer our comments in response to the White Paper on Sound Practices to Strengthen the Resilience of the U.S. Financial System (White Paper).

DBED applauds the efforts to insure that proper safeguards are in place to protect the US financial system. We appreciate the opportunity to join the discussion on this important regulatory matter. Any rulemaking on business recovery and resumption should be developed with care and deliberation.

DBED, as an economic development agency, is particularly concerned with one aspect of this White Paper. The Request for Comments section, on page 17, raises the following issue:

Should some minimum distance from primary sites be specified for back-up facilities for core clearing and settlement organizations and firms that play significant roles in critical markets (e.g., 200-300 miles between primary and back-up sites)? What factors should be used to identify such a minimum distance?

Quite simply, the 200-300 mile minimum distance requirement for primary operations to be located away from backup facilities is arbitrary, irrelevant, and does not focus on the importance of separate and independent infrastructures. Instead, what is critical are the independent infrastructures of a labor pool, telecommunications, electric power and transportation systems.

The distances between the cities of New York and Baltimore range from 170 to 206 miles, depending upon what geographic points within each metropolitan area are used. A 200-300 mile minimum distance for primary operations to be located away from back-up facilities would not allow either city to serve as either a primary operation location or a back-up facility location. Maryland is home to one of the leading financial services clusters outside of New York with over 140,000 professionals employed in the financial services business sector, including some 56,000 in the greater Baltimore metropolitan region alone.

DBED recognizes that establishing out-of-region standards may minimize the risk that the labor pools of the primary operation and back-up facility would be impaired by a "single wide-scale regional disruption." However, a 200-300 mile distance specification may preclude major financial firms from accessing labor pools with the highest level of financial services knowledge. Furthermore, imposing such limitations would have an adverse effect on business continuity.

Clearly, the distance between the two cities necessitates that Baltimore have a separate and distinct labor market from New York. In addition, Baltimore has an independent telecommunications infrastructure relying upon redundant capabilities. With our proximity to Washington and Northern Virginia Baltimore is part of an extensive telecommunications network that features a high-speed, fiber backbone that connects our area with the entire country and the world through direct links to the United Kingdom and Germany.

Baltimore has a separate and distinct electric power grid from the City of New York. Baltimore, Maryland is part of the "PJM" (Pennsylvania, New Jersey, and Maryland) power grid, which is separate and distinct from the New York power grid.

As part of an independent transportation infrastructure, Maryland has well-maintained interstate highways with easy access to significant markets North, South, and West. Baltimore also enjoys access to three international airports, and Baltimore-Washington International Airport is America's fastest growing international airport.

Finally, Baltimore has an excellent commuter rail system that includes Amtrak and the MARC system.

In conclusion, DBED strongly advocates that an arbitrary mileage limit not be made part of any potential rulemaking, but that the independence of regional infrastructures be the primary criteria. I appreciate the opportunity provided by the agencies to comment on the White Paper and hopes to continue this important dialogue. If you have any questions or comments, please contact me at 410-767-6301 or Daniel C. Gundersen, Assistant Secretary, at 410-767-6740.


David S. Iannucci

cc: Senator Barbara Mikulski
Senator Paul S. Sarbanes
Governor Parris N. Glendening
Vernon Thompson, Assistant Secretary, Regional Development
Daniel C. Gundersen, Assistant Secretary, Business Development