Soft underbelly: 'scrambling data' a greater threat than hacking, intelligence chief says.

• Position: SECURITY BEAT: HOMELAND DEFENSE BRIEFS

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SAN DIEGO -- Hackers defacing websites or stealing information is bad, but the destruction of computer data could be worse, said Director of National Intelligence Michael McConnell, in one of his last speeches as a member of the Bush administration.

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"The United States is the most vulnerable nation on the face of the Earth to cyber-attack," said McConnell. "For a simple reason," he added. "We are the most dependent."

Hacking and denial of service, where a foreign country basically shuts down another's Internet service, are two well known vulnerabilities, he said.

But "data destruction" is a greater--albeit a lesser known--threat, he insisted. Banks could be prime targets.

The U.S. financial system is based on accounting entries. Banks don't keep cash or gold on hand anymore. It's all data stored on servers, he said.

"If someone can scramble the data, it could potentially destroy a bank," he said. "It could have a cascading effect [on the economy]," he said at the Milcom conference here.

This data is the "soft underbelly" of what makes the nation function, he added.

His conclusion comes from a intelligence forecast released between the presidential election and the inauguration so it would not color the results of the vote.

Meanwhile, al Qaida is still the number one threat to the United States, McConnell said.

Since January 2007, the effectiveness of al Qaida in Iraq has declined by 65 to 80 percent, he said. While the "surge" was a factor, he attributed some of this success to better collaboration and the sharing of information between the Defense Department and...