Greenspan: Threat of massive Y2K computer failures ‘negligible’
September 16, 1999
WashingtonWashington — WASHINGTON (AP) Federal Reserve Chairman Alan Greenspan today characterized as virtually nonexistent the threat that the United States will suffer massive computer failures because of the Year 2000 date change. — WASHINGTON (AP) Federal Reserve Chairman Alan Greenspan today characterized as virtually nonexistent the threat that the United States will suffer massive computer failures because of the Year 2000 date change.
Washington — WASHINGTON (AP) Federal Reserve Chairman Alan Greenspan today characterized as virtually nonexistent the threat that the United States will suffer massive computer failures because of the Year 2000 date change.
But he cautioned that the economy could still be effected, depending on how many businesses and consumers alter their normal buying patterns because of unwarranted fears.
”The probability of a cascading of computer failures in mission-critical systems is now negligible, given the testing that has been done, the backup plans that are in place and the great adaptability and ingenuity of the American worker,” Greenspan said in the keynote speech to a daylong conference of federal regulators on Year 2000 preparations.
The conference was convened to survey what has been done and what is left to do in getting the U.S. economy ready to handle the Year 2000 date change.
Greenspan said the private sector has spent an estimated $50 billion to upgrade computer systems so that they will not misread the date 2000 as 1900.
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”While it is easy to obsess about the few institutions in our society that may not be ready, let us not lose sight of the fact that the overwhelming majority of us are not only prepared but have contingency plans to deal with breakdowns,” Greenspan said.
”Many firms and government agencies have completed their testing, and those institutions that were late off the block are working very diligently to be ready by the end of the year,” he said.
In terms of economic impact, Greenspan said he was now more concerned not about the possibility of major computer failures, but how the public and businesses may alter their spending patterns in the months ahead.
He said should a large number of companies decide they want to hold even a few extra days of inventories, then the increase in production to accommodate such ”stock building could be quite large. Bottlenecks could develop and market pressures could ensue.”
The Federal Reserve has already increased interest rates twice since late June in an effort to slow the economy enough to make sure that inflation pressures are not triggered by tight labor markets or possible bottlenecks in production that would cause firms to boost prices.
Greenspan said there has already been a noticeable rise in interest rates for corporate borrowing as many corporations move forward bond sales to avoid having to be in the market around the Year 2000.
He said an even greater impact on the economy could hinge on ”the uncertain response of the American consumer as yearend approaches.”
While Greenspan said only a small number of Americans are telling pollsters that they plan to build large stockpiles of food, water, fuel and cash as Jan. 1 approaches, the economy could be affected if a larger percentage of Americans start taking such actions because of unwarranted concerns.
On the need to have cash on hand, Greenspan urged Americans that the safest thing Americans can do is leave their money in the bank.
”Consumers should prepare for the century date change as they would for any long weekend. 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,” he said.
Greenspan said the possibility that more Americans may start stockpiling is likely to rise as the news media devotes more attention to the Jan. 1 date change.
”It is too compelling a story for audiences that thrive on countdowns to the unknown,” Greenspan said.
But he urged the financial regulators to make every effort to get the facts out to the public to counter rumors.
”In the final analysis, facts are the only antidote for rumors,” he said.
Greenspan’s remarks followed a joint news conference on Thursday by all federal banking regulators to let the public known that the financial system is now ready for the date change.
Comptroller of the Currency John D. Hawke Jr. said that ”99.7 percent of all federally supervised financial institutions have finished their renovations and tests of their systems.”
He said the small number of banks who have not completed their preparations ”are receiving intensive, on-site supervision to ensure that they, too, will experience no disruptions of the systems their customers depend upon.”