Cyberattacks Could Disable Banking System, Hagel Says

Could cyberattacks bring down the U.S. financial network? Chuck Hagel thinks it's possible.

Shielding the U.S. against the destructive potential of digital threats is among the top priorities for the nation, the Defense Secretary said Thursday during a stopover in Hawaii.

"You know, these attacks can paralyze an electric grid, a banking system, knock out computers on ships or weapons systems, and you never fire a shot," Hagel told troops in Honolulu. "This is a very difficult, but real and dangerous threat. And there's no higher priority for our country than this issue."

Hagel's comments come ahead of a meeting slated for next week in California between President Obama and Chinese president Xi Jinping at which the leaders are expected to discuss cyber threats.

A series of reports this spring have charged China with using hackers to snatch secrets from U.S. companies, including financial firms. The Chinese have denied the allegations.

The administration has proposed a voluntary framework to spur sharing of cyber threats between the government and private-sector organizations while calling on Congress to pass legislation that incentivizes companies to participate. In April, the House of Representatives passed the Cyber Intelligence Sharing and Protection Act but the Senate is unlikely to take up the measure because of concerns among the White House and Democrats that the bill does too little to protect privacy.

Spending to reinforce cyber warfare capabilities is among the few items in the defense budget that the administration proposes to increase, said Hagel. "That means more people, more sophisticated approaches, and more interconnects within our inter-government agencies, obviously, the NSA, Cyber Command, Homeland Security, working with our law enforcement," he said.

Hagel said the nature of electronic threats make them difficult to combat. "Cyber is one of those quiet, deadly, insidious unknowns you can't see, it's in the ether," he added. "And it's hard to detect exactly where it comes from, so you've got that added problem, if you respond, where do you respond, how do you respond, are you sure you're responding to the right person, the right country, the right entity in that country?"

"Tough issue," Hagel added. "But we're working on it. And we're working very hard on it."