UPDATE 11-Irene floods US northeast, Manhattan spared worst

* Irene blamed for 20 deaths, NYC spared big hit

* U.S. stock markets expected to open on Monday

* Subways and air traffic to resume, commuter rails out

* Irene downgraded to tropical storm, heads to Canada
(Adds resumption of subway service)

By Edith Honan and Clare Baldwin

NEW YORK, Aug 28 (Reuters) - Hurricane Irene swept through
Manhattan on Sunday but reserved the worst of its fury for
towns and suburbs up and down the northeastern United States
where driving rain and flood tides inundated homes and cut
power to millions.

On its march up the East Coast over the weekend, the storm
killed at least 20 people, left some 5 million homes and
businesses without electricity, caused widespread flooding and
downed thousands of trees. Suburban New Jersey and rural
Vermont were hit particularly hard.

Irene forced the closure of New York's mass transit system,
which will crawl back to service on Monday starting at 6 a.m.
(1000 GMT), and the cancellation of thousands of flights, some
of which would resume on Monday. [ID:nN1E77R0A1] Most of the
commuter rail service bringing commuters from the suburbs to
New York City would remain suspended.

President Barack Obama warned the region's problems were
far from over. "Many Americans are still at risk of power
outages and flooding which could get worse in the coming days
as rivers swell past their banks," Obama said, promising
federal government help for recovery efforts.

By late Sunday afternoon, Irene was bringing tropical storm
conditions to the six states of New England. Irene was still a
tropical storm, packing winds of 50 mph (80 kph) as it
approached Canada, the U.S. National Hurricane Center said.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

TAKE A LOOK on Irene [ID:STORM]

Reuters Hurricane Tracker r.reuters.com/zug92s

National Hurricane Center www.amgdata.com

Skeletonize Weather www.skeetobiteweather.com

Factbox on power outages [ID:NnN1E77Q05B]

Weather Underground: www.wunderground.com/tropical

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It wasn't immediately clear how much Irene would cost but
in New Jersey alone the damage was expected in "the billions of
dollars," Governor Chris Christie told NBC's "Meet the Press."

With many thousands of homeowners in the region suffering
flooding there will be many questions over whether insurance
policies offer cover and whether the federal government's flood
program can handle the claims, especially at a time of
austerity in Washington and in cash-strapped states.

New York City's 8.5 million people are not used to
hurricanes and the city is plagued by aging infrastructure,
leading many to issue dire warnings in recent days about what
the hurricane could bring.

Authorities took unprecedented steps to prepare, including
mandatory evacuations and a total shutdown of mass transit
systems that will have had a major economic impact.

About 370,000 city residents who had been ordered to leave
their homes were told they could return on Sunday afternoon.

Most bridges, tunnels, subways and city buses will be
functioning normally, but the Metro-North and Long Island Rail
Road commuter rail would remain suspended, stranding commuters
who travel to Manhattan from suburbs to the north and east.

Rail service from New Jersey, home to hundreds of thousands
of people who travel into New York each day, was still out,
although limited bus services were expected to resume.

It all means that many who normally commute into Manhattan
and elsewhere in the region will find it very difficult to get
to work on Monday, though financial markets were expected to
open as normal, albeit with reduced volume. [ID:nN1E77R061]

"All in all we are in pretty good shape," Mayor Michael
Bloomberg said, adding that while it would be a "tough commute"
on Monday there had been no long-term damage to the subway
system.

Bloomberg said there were no reports of deaths or injuries
in the city, though there were some close calls. In Staten
Island, firefighters with boats rescued more than 60 people
including three babies from 21 homes flooded with five feet
(1.5 metres) of water.

While it weakened before it hit New York, the swirling
storm still packed a wallop, especially in districts such as
the Rockaways peninsula, a low-lying strip of land exposed to
the Atlantic Ocean on the southeastern flank of the city.

Authorities closed three bridges leading to the peninsula
before the storm.

"It was like being in the hull of a ship," said Patricia
Keane, 42, who stayed in her Rockaway home and lost power but
then used backup generators to supply electricity to herself
and four neighbors, who all had flooded basements.

NEW JERSEY SLAMMED

New Jersey was hard hit by flooding, downed trees and power
outages. More than 100 dams in the state were being monitored
for spills from high water, and one downstream town, High
Bridge, was evacuated, Christie said.

Four people were killed in Pennsylvania from the effects of
Hurricane Irene, including two men killed by falling trees, a
state official said. That raised the U.S. total to 20 dead in
addition to three who were killed in the Dominican Republic and
one in Puerto Rico when the storm was still in the Caribbean.

Virginia Governor Bob McDonnell, whose state was hit
earlier by the Hurricane, told CNN "We prepared for the worst
but came out a little better than expected. Unfortunately now,
four fatalities have been confirmed,"

"We've got some significant damage in some areas, from
flooding, from wind, a lot of trees down, 2.5 million people or
more without power in Virginia, that's the second largest
outage in history," he said.

In North Carolina, where authorities confirmed at least six
storm-related deaths since the hurricane made landfall on
Saturday, Governor Bev Perdue was expected to request a federal
disaster declaration.

The storm dumped up to eight inches (20 cm) of rain on the
Washington region, but the capital avoided major damage.

As the storm moved north on Sunday, New England officials
reported flooded roadways, trees downed over rail tracks and
evacuations in some towns.

The storm zone stretched from Massachusetts' eastern
islands of Martha's Vineyard and Nantucket to the western
Berkshires mountain range, where authorities braced for dam
failures because of the heavy rains.

SIGH OF RELIEF

In Manhattan, where massive flooding in the Financial
District surrounding Wall Street was feared, there was a foot
(30 cm) of water in the streets at the South Street Seaport in
Lower Manhattan before the tide began receding at mid-morning.

Jeremy Corley, a 32-year-old web manager, was out in shorts
and a rain jacket at the Seaport on Sunday morning. "I was
watching the news on TV and they were way over-exaggerating how
bad it is so I wanted to go outside and check it out."

Nearby, a man was walking two dogs through water that came
up to the bellies of his pets. Further north, a man was seen
kayaking in the street, though the water was not very deep and
a cyclist was able to make his way along the same street.

Wall Street seemed largely unaffected as did Ground Zero,
where the 10th anniversary of the Sept. 11 attacks is soon to
be observed.

The impact was felt harder on Long Island. The waves at
Long Beach, which faces the Atlantic Ocean, crested over the
boardwalk and onto the streets, taking with them a two-story
life-guard station.

After Irene, weather watchers were keeping an eye on
Tropical Storm Jose, which formed near Bermuda.

This year has been one of the most extreme for weather in
U.S. history, with $35 billion in losses so far from floods,
tornadoes and heat waves.
(Additional reporting by Pascal Fletcher in Miami; Joe Rauch
and Jim Brumm in Wilmington, N.C.; Tom Hals in Delaware;
Claudia Parsons, Basil Katz, Edith Honan, Phil Wahba, Clare
Baldwin, Jonathan Allen and Ernest Scheyder in New York;
Alistair Bell, Malahti Nayak, Andy Sullivan, David Morgan and
Lisa Lambert in Washington; Andrea Shalal-Esa in Ocean City;
Michael Fitzpatrick in Long Branch, New Jersey; Grant McCool in
Toms River, New Jersey; Writing by Claudia Parsons; Editing by
Martin Howell, Daniel Trota and Anthony Boadle)