The Fed will stash $200 billion as a safeguard against Y2K

ASSOCIATED PRESS

The public should have confidence that the nation's financial infrastructure, including check processing, automated tellers, credit and debit cards, and direct deposits, will run smoothly despite the Year 2000 computer problem, a Federal Reserve official says.

Robert T. Parry, president of the Fed's San Francisco district, which covers nine Western states, said the Fed will have $200 billion in cash available as a cushion against Year 2000-related demand, enough to keep the nation's financial system afloat even if every adult in the nation withdraws $1,000 at year's end.

Philadelphia Fed Vice President and Secretary Herb Taylor said the $200 billion includes the $150 billion reserve that is already in the Fed's vaults, plus $50 billion that the government is printing in case bank customers begin withdrawing large amounts of cash because of Y2K fears.

In addition to the cash in vaults, about $200 billion is normally in circulation in the United States, Taylor said.

Parry said printing extra cash is just one of the many ways in which the Fed has prepared for the Year 2000 computer problem.

"As an economist, I deal with probabilities all the time," Parry said Wednesday. "I think the probabilities are very high that on Jan. 1, 2000, nothing very unusual is going to happen."

One step the Fed is considering is giving banks easier access to loans from its "discount window" in case Y2K creates a strain on liquidity.

Normally, the discount window is a last-resort borrowing tool for banks. But the Fed Board of Governors is considering setting up a special lending program that would free banks from the requirement that they first seek funds elsewhere. It would also eliminate restrictions on the ways the money could be used and would give banks more time to repay, Taylor said. Collateral requirements would be the same.

Loans would be available to banks from Nov. 1 to April 7 at 1.5 points above the federal funds rate, which is the rate banks charge each other for overnight loans. That rate was 4.8125 percent as of 4 p.m. yesterday.

Taylor said the idea is to make sure banks can confidently make loan commitments to customers because they know money will be available.

The Y2K problem arises from computer programs that may confuse the year 2000 with 1900.

About 98 percent of the computer systems in thousands of banks that do business with the Fed are Y2K-ready, and the rest should meet federal regulations for Y2K readiness by the end of this month, Parry said.

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Inquirer staff writer Leslie J. Nicholson contributed to this article.

-- Norm (nwo@hotmail.com), June 04, 1999

Answers

Why are you posting this? This information has been the same since last FALL. It's just a "re-hash" to keep people from freaking out. The guts of the story are INDENTICAL to last fall.

-- Dennis (djolson@pressenter.com), June 04, 1999.

When Bill Gates takes his money out on 12-1, how much will be left for the rest of us?

-- (cannot-say@this.time), June 04, 1999.

Dennis:

Norm has to....it's his job....the ABA & the FED are absoltuely quaking in their collective boots about this issue; hence they continue to get increasingly shrill about how everything is soooo normal so public is less likely to get suspicious.

Works everytime......

-- Charles R. (chuck_roast@trans.net), June 04, 1999.

Hey Norm, do you mean to tell me that the banks do not have enough money to cover our deposits? This can't be true. they told me when I gave them my money that I could have it ALL anytime I wanted it (Demand Deposit). Is it possible they were LYING to me? Oh my this can't be true.Could you look into this for me and let us ALL know what the scoop is Normmy.

Ray

-- Ray (ray@totacc.com), June 04, 1999.

Correct me if I'm wrong. Feds are stashing only $50 bill's for Y2k in addition to the "normal" $150 bills.

-- Not Again! (Seenit@ww2.com), June 04, 1999.

Not just spin, but old spin. Boooooooorrrrrrriiiiinnnng.

-- Lee (lplapin@hotmail.com), June 05, 1999.