Wall Street Prepares for the worst hope for the best

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I find it interesting the comments made about maintaining liquidity at the end of the year. Also note the 10 critical days on either side of Dec 31,1999.

Wall Street Expects The Best For Y2K, Plans For Worst

Full Coverage Year 2000 Problem NEW YORK (Reuters) - With seven months until the Year 2000, Wall Street Tuesday said it has conquered the once dreaded Year 2000 (Y2K) computer problem and outlined plans to deal with foreign shockwaves or glitches that could still arise.

The Securities Industry Association (SIA) laid out complex contingency plans -- a kind of Y2K survival guide -- for U.S. financial firms in an inch-thick report, released Tuesday.

The report details measures as simple as having all hands on deck Dec. 31, to limiting trading activity around the New Year to what is commercially essential.

Brimming with confidence, Goldman Sachs & Co. Managing Director Gerald Corrigan prefaced the report by saying Y2K contingency planning did not mean problems were expected.

``I feel very confident, overall, as we sit here 7 months from this date change,'' Corrigan, chairman of the SIA's Y2K contingency planning committee, told reporters at Goldman Sachs' downtown Manhattan headquarters.

``But you can't ignore the problems, as remote as they may be.''

The Y2K computer problem stems from glitches that can arise in older computers and software programs which only allow two digits for the year in dates. Unless the systems are fixed or replaced, the year 2000 may be read as 1900, causing computers to crash or spew out bad data.

The financial sector is one of the best prepared of any to face Y2K and U.S. financial companies are further ahead than any in the world.

Investor confidence, Corrigan said, also appears well up from 6 to 9 months ago. He gave the example of an abatement in trades to try and exploit changes in interest rates that might occur as a result of the Year 2000 rollover.

The report, which took over 6 months to prepare, also serves as a blow by blow trouble-shooting guide for top executives in the wholesale securities industry. It is not aimed at the retail market or the army of small private investors known as ``day traders,'' Corrigan said.

Perhaps the greatest uncertainty facing big securities companies lies in the ability of financial institutions outside the G7 group of nations to handle the date change, he said. But he cited examples in which exchanges have hand-reconciled trades during calamities such as a 30-hour computer failure at the Bank of New York in 1985.

``If you reach the point where a market or an exchange has to be closed it's not the end of the world,'' he added.

Corrigan, a former chairman of the Federal Reserve Bank of New York, said he did not expect there to be ``any meaningful slowdown'' in business activity around the New Year. He did, however, say there would be a distribution change as companies schedule important trades away from the critical 10 days on either side of Dec. 31.

Corrigan said securities firms would be working to maintain liquidity in the last 10 days of December and the first 10 days of January, to give them flexibility in dealing with potential Y2K problems.

-- y2k dave (xsdaa111@hotmail.com), May 26, 1999


The report also recommends that the government plan for the possibility of "large scale disruptions of processing activities."

It appears that the investment firms are being advised to reduce their foreign related investment and the debt associated with that investment.

It appears to me that this would decrease liquidity and volatility for those remaining in the market; however, it might buffer the domestic domino effect of golbal failures.

This does beg a question: Who will be the dupes or mooches who buy these at-risk assets? Will it be a bunch of idiots who do not discount for y2k risk? Will it be sophisticated investors who demand deep discounts?

Are you beginning to see a pattern yet? Remember that the official assessment of at-risk countries was not made public? Why? Ever try to sell a sinking ship?

Rest assured that the glibbest of the smooth talkers and the most charming of the charismatic master salesmen at (I omitted names here, you can supply those of your choice) and the others have been and will continue wear out the phone lines and first-class airline seats in their effort to identify and measure their victims.

Of course, there is a small problem. How do you find someone with that much money who is stupid enough to buy from you? I guess we'll have to wait for the book to come out.

-- Puddintame (achillesg@hotmail.com), May 26, 1999.

I can imagine all those middle-aged out of shape brokers running around the trading floor trying to swat the bug with their inch thick report.

-- Mike Lang (webflier@erols.com), May 26, 1999.

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