Saturday, September 18, 1999
Experts: Stockpiles for Y2K may harm
Industry is well-prepared
BY TED BRIDIS
The Associated Press
WASHINGTON — Stockpiling and inventory hedging against Year 2000 computer failures could cause worse trouble than the Y2K glitch itself, the nation's top financial leaders warned Friday.
If worried companies hold back more inventories than usual, “bottlenecks could develop, and market pressure could ensue,” Federal Reserve Chairman Alan Greenspan said.
Mr. Greenspan appeared Friday at a conference in Washington with other government leaders and regulators to discuss Y2K repair efforts by the financial industry, considered among the most well-prepared sectors of the economy.
Mr. Greenspan noted that private companies have spent an estimated $50 billion on repair efforts and said the chance for cascading failures in the most important computer networks seemed to be “now negligible.” The government reported earlier this week that it had spent $8.34 billion on repairs.
“The response of business es and households to unwarranted fears of serious disruptions does give me pause,” Mr. Greenspan said.
“Consumers should prepare for the century date change as they would for any long weekend,” he said. “Those people who do cash out a significant part of their deposits only increase the risk that they will become victims of crime or fraud.”
Mr. Greenspan said the possibility that more Americans might start stockpiling is likely to rise as Jan. 1 nears and news media devote more attention to the issue. He urged financial regulators to work hard to counter scare stories.
“In the final analysis, facts are the only antidote for rumors,” he said.
Arthur Levitt, chairman of the Securities and Exchange Commission, said the financial industry was so prepared that “disasters that some originally predicted, will not even get an honorable mention in the history books.”
“I see no reason why fear of a Year 2000 problem should cause investors to alter their investment or trading habits,” Mr. Levitt said. “Actions taken by investors based on unreasonable fear or bad information pose a greater threat to our economy.”
The Federal Deposit Insurance Corp. has graded less than satisfactory only 27 of the nation's 10,922 banks and other financial institutions in their Y2K repairs — including seven deemed “unsatisfactory” as of this week, FDIC Chairwoman Donna Tanoue said.
The FDIC declined to identify those institutions, although Mr. Levitt said at the conference, “Our indus try flourishes in the sunlight of disclosure. Investors simply cannot make informed decisions in the dark.”
The FDIC said it routinely publicizes any formal enforcement action but won't identify results of intermediate reviews. All deposits are insured regardless.
Laura Unger, an SEC commissioner, said Friday that only 13 trading firms — all identified in commission documents — were not adequately prepared, although all have indicated they will be ready mid-October. The SEC has set a mid-November deadline.
“Any firm that is unable to meet that deadline will be put out of business by the SEC,” Ms. Unger said.
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