Credit Unions in U.S. to get Y2K Liquidity Boost : LUSENET : TimeBomb 2000 (Y2000) : One Thread

This is the first time I've ever heard about the Central Liquidity Facility. The provision was attached to a larger spending bill:

U.S. Credit Unions Get Special Y2K Liquidity Boost

06:34 p.m May 24, 1999 Eastern

WASHINGTON (Reuters) - U.S. credit unions will receive a massive liquidity boost to meet any increased demand for funds arising out of the Year 2000 problem, the National Credit Union Administration said Monday.

President Clinton Friday signed into law a measure that increased the borrowing limit of the Central Liquidity Facility, credit unions' backup source of funds, from $600 million to more than $20 billion, the NCUA said.

And the agency has also struck a deal with the Federal Reserve to give the 11,000 U.S. credit unions access to any funds that may be required above this amount through the central bank's discount window, it said.


U.S. regulators have said they do not expect major disruptions to the banking system from the Y2K bug and have urged people not to withdraw money from their financial institutions ahead of the millennium date change.

But studies have indicated that many still plan to do so, which could create an unusual demand for funds and strain the system. A nationwide Gallup poll released Friday found 64 percent of those surveyed planned to withdraw and set aside extra cash ahead of the end of the year.

``Credit unions can rest assured that if there is an unlikely liquidity problem in the system, NCUA and the CLF are well prepared to deal with it through these expanded avenues,'' said NCUA Chairman Norman D'Amours.

In terms of the agreement, the Kansas Fed would make a secured loan to a newly-organized depository institution, which will then provide liquidity to the U.S. Central Credit Union. It, in turn, will provide funds to the corporate credit unions which serve individual credit unions.

The arrangement will ``assure a source of liquidity in the event the nation's credit unions require additional funds to meet credit union member needs arising from the millennium date change,'' the NCUA said.

The Federal Reserve Friday proposed making special loans available to banks that may need access to extra funds as a result of the millennium. The facility would be available from Nov. 1 to April 7, 2000.

The provision authorizing the increase in the CLF was attached to a $15 billion spending bill passed by Congress and signed by Clinton last week.

Copyright 1999 Reuters Limited. All rights reserved.


-- Kevin (, May 25, 1999


Hi, Kevin,

Sorry this isn't exactly related to your topic, but I didn't want to start a new thread. It does relate to the way people might/might not be able to get their cash.

Given the amount of mainstream media attention ATM's have been given in the past year, I had just assumed that they would have been fixed long ago. But, lo, look at this article.

(for educational purposes only)

ATM's Need to be Y2K Ready

"ATM Service Company Ordered To Be Compliant By July By Marcy Gordon

The Associated Press

W A S H I N G T O N , May 21  Banking regulators worried about the Year 2000 readiness of a big ATM service company in the West have ordered it to get in shape by June 30 or face possible contract cancellations by its 750 bank customers.

The directive given to TransAlliance LP by the Federal Reserve and four other agencies comes as increasing attention is being paid to companies that offer support services for the banking industry.

Their failure to become Year-2000 compliant could be just as devastating as failure by the banks themselves, though projections about possible outcomes differ widely. Scenarios of a Y2K failure range from consumers being temporarily unable to use ATM machines to having their entire financial information wiped out when computer systems crash.

Government regulators have lauded the nations banking industry for its work preparing for the technology problem, when some computers originally programmed to recognize only the last two digits of a year could interpret 2000 as 1900.

Bankers have promised consumers that ATM machines, credit cards, checks and banking services will function normally through the millennial date change. However, banks, thrifts and credit unions, all of which are closely regulated, are linked with numerous companies that provide services to banks and operate with less government supervision.

Firms May Not Be Ready

A lot of these (service) firms may not be ready for the Year 2000, said Edmund Mierzwinski, consumer program director for the U.S. Public Interest Research Group, a consumer advocacy organization. Im happy that the Federal Reserve is putting its foot down early.

The Friday announcement came on the same day as a release of a new Gallup poll in which nearly 79 percent of those surveyed fully expect the Y2K problem to have little or no impact on their personal finances.

The poll of 1,606 adults indicated, however that almost two-thirds of people questioned said they expect to set aside extra cash in the days before New Years, though most said it wont be a large amount.

Under the agreement with regulators, TransAlliance will make needed changes in its computer systems so that all its bank customers will be able to successfully complete their Year 2000 testing by June 30  the deadline set for banks by the federal government.

TransAlliance, based in Bellevue, Wash., also agreed to have its own systems ready by that date.

In the event the conditions werent met, the banks that TransAlliance serves would be allowed without penalty to annul their contracts with the company.

The regulators also would have the authority to impose fines on the company, but that isnt mentioned in the agreement.

John Hall, a spokesman for the American Bankers Association, said the regulators are doing their job and making sure that consumers money is safe. ... It brings pressure on companies that provide services to financial institutions.

TransAlliance provides automated teller machine services, including electronic transaction services, to some 750 banks, thrifts and credit unions in 13 western states and Canadas British Columbia province.

Electronic Data Systems, the technology company founded by billionaire Ross Perot, owns 50 percent of TransAlliance. The other half is owned by a group of 24 banks in the West which operates the Exchange ATM network.

Customers of TransAlliance include Washington Mutual Bank, KeyCorp, the credit union for employees of Boeing Co. and First Mutual Bank of Bellevue.

We are pleased that we could agree with the regulators on the steps we are taking to ensure Y2K readiness by June 30, James D. Benson, TransAlliances president and chief executive officer, said in a statement.

TransAlliances bank customers are located in Alaska, Arizona, California, Colorado, Hawaii, Montana, Idaho, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming.

In addition to its bank customers, TransAlliance also provides electronic services to some 50,000 outlets, where machines take cards for payment at gas stations, convenience stores and other locations. That system is not covered by the agreement.

The agreement also was signed by the Federal Deposit Insurance Corp., the National Credit Union Administration, the Office of Thrift Supervision, the Office of the Comptroller of the Currency, which oversees nationally chartered banks, and Washington states Department of Financial Institutions."

-- Rachel Gibson (, May 25, 1999.

Kevin----getting back to your original post. 20 billion dollars in credit attached to a 15 billion spending bill. It sounds like they know we will be taking a lot of "our money" out of the system no matter what spin they put on this "Y2K thing". Sounds like more than a bump in the road to me. They are increasing those back up credit funds by more than 33 times. What is going on there?

-- thinkIcan (, May 25, 1999.

President Clinton Friday signed into law a measure that increased the borrowing limit of the Central Liquidity Facility, credit unions' backup source of funds, from $600 million to more than $20 billion, the NCUA said.


Agreed. That is some contingency plan!

-- Kevin (, May 25, 1999.

Banks need to have liquidity to have cash. This goes hand in hand with the FED building up the actual hard cash reserves. The money needs to be on the books, too. This way, instead of selling assets such as T-Bills, etc., CU's can borrow money from the Fund to fund larger cash holdings. The FED is doing virtually the same thing for banks and S&L's. see, May 21 press release.

-- newlurker (, May 25, 1999.

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