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Consumers urged to avoid investment scams exploiting Y2K fears
By Marcy Gordon / Associated Press Business Writer
WASHINGTON -- Lawmakers and regulators said Tuesday that the public should watch out for new investment scams that prey on fears that banks won't be able to handle the Year 2000 computer bug. The House Judiciary Committee, meanwhile, heard testimony from business leaders and lawmakers warning of dire economic results if Congress does not pass legislation limiting what some experts predict could be $1 trillion in lawsuits arising from the computer glitch. As Congress grappled with the Year 2000 problem on several fronts, Rep. Jim Leach, R-Iowa, chairman of the House Banking Committee, said at another hearing that the banking industry appears well prepared, although some troubling questions remain. Leach asked, for example, why companies assessing banks' Year 2000 readiness have been less confident than banking regulators. He also noted that the inspectors general at some agencies, such as the Federal Deposit Insurance Corp., have raised questions about the thoroughness and accuracy of the agencies' Year 2000 examinations of banks. The nation's banks, thrifts and credit unions "need to be prepared for a confidence deficit" on the part of the public, Leach said. "As in the case of fire, if there is a panic in the banking sector, and everyone rushes to the door, someone is likely to get hurt." Some con artists have tried to persuade people to take their money out of banks to avoid computer foul-ups, then turn it over to be invested with them in gold, silver, small-company stocks or other assets. Some unscrupulous promoters are sending unsolicited e-mail messages selling investment opportunities in companies or products that are touted as fixing the Year 2000 problem, according to state securities regulators. "There may be cases of Y2K fraud or swindle," said Donna Tanoue, the FDIC chairwoman. "If a deal seems too good to be true, it probably is." The nation's bankers have promised that ATM machines, credit cards, checks and banking services will function normally through the millennial date change. They have warned that withdrawing massive amounts of cash could make consumers vulnerable to being robbed. Also, the Federal Reserve has ordered an additional $50 billion of new currency to be put into circulation in the event people make a run on banks. By the end of the year, $200 billion in currency will be stored in government vaults, up from the $150 billion normally held in reserve. That's in addition to the $460 billion in notes circulating in the United States and abroad. The proposal debated by the Judiciary Committee seeks to head off a flood of lawsuits by giving companies that are potential defendants up to 90 days to fix Year 2000 problems before a suit goes to court, and by promoting mediation.
-- Norm (email@example.com), April 14, 1999