What bump " Parry"..... did you feel a bump?greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Fed's Parry Sees Little Y2K Threat To U.S. Economy Wednesday, July 14, 1999
LOS ANGELES (Reuters) - Federal Reserve Bank of San Francisco President Robert Parry Tuesday predicted that a potential lack of Y2K-readiness in some foreign countries does not present a big threat to the U.S. economy.
``I do not see it as a major threat to our economy at this time,'' Parry told a Town Hall Los Angeles forum.
Since older computers were programmed using only the last two digits of the year, systems that have not been upgraded could fail when the year changes from 1999 to 2000.
Parry said most industrialized countries are up to speed on year 2000 readiness, but there are indications some African and Southeast Asian countries may not be as well-prepared.
Parry repeated previous assurances that the U.S., including the banking industry, will not experience any serious problems when the year 2000 starts.
As of May 31, the Federal Reserve said 98.3 percent of U.S. banks met standards for Y2K compliance and it was working with the remainder to make sure they get there.
Parry also said it was unlikely that spending on Y2K programs would have a major impact on the U.S. gross domestic product (GDP) growth.
``It could have a very small effect, perhaps adding a couple of tenths to GDP in 1999 and perhaps subtracting a couple of tenths in 2000,'' Parry said, noting that planning for the date change has led to a surge of new equipment orders this year.
At the same time, businesses and others have delayed projects until after the new year, and the launch of that spending could very well add to U.S. economic growth next year, Parry said.
Fed Chairman Alan Greenspan is expected to announce to Congress on July 22 the Fed's revised GDP growth forecast for 1999.
-- kevin (firstname.lastname@example.org), July 14, 1999
This is pathetic, idiotic, and disconcerting. Brains, Parry, use your brains. This is beyond a conspiracy to lull, this is simple stupidity.
-- Mara Wayne (MaraWayne@aol.com), July 14, 1999.
maybe we should turn him on to the BIS/SWIFT situation.......
-- lisa (email@example.com), July 14, 1999.
oh, victory dance! Y2K is goodie, stimulates growth, will be really good for the economy, already boosted gadget spending, 1st Q 2000 will be even better, all the FOFs will know what to spend. Good times will get even better! Y2K is the golden stimulus we all needed to keep the progress rolling along. Joy! Pop the champagne early. Bubbly!
-- Sure I buy it (firstname.lastname@example.org), July 14, 1999.
"Federal Reserve Bank of San Francisco President Robert Parry Tuesday predicted that a potential lack of Y2K-readiness in some foreign countries does not present a big threat to the U.S. economy.
``I do not see it as a major threat to our economy at this time,''"
Just gotta "love" those little "qualifiers" from the Fed Reserve-guys.
Wonder what else they "qualify" for?
-- Diane J. Squire (email@example.com), July 14, 1999.
More from Federal Reserve Bank of San Francisco ...
FEDERAL RESERVE BANK OF SAN FRANCISCO Y2K Liquidity Contingency Planning
Here are some suggestions for shaping your Y2K liquidity contingency plan:
1.When you estimate how much liquidity you may need for a Y2K problem, we strongly suggest that you focus on developing a worst-case scenario. Consider two points.
First, there is little need to plan for a minor increase in the demand for cash. Most banks can easily accommodate minor increases in deposit withdrawals and loan demand from existing liquidity sources.
Second, the risks and rewards associated with liquidity are asymmetrical. By that we mean that the risk of having too much liquidity - less robust profits - is almost always much smaller than the risk of not having enough liquidity - in the extreme, bank failure.
Consequently it makes sense to focus contingency planning on a potentially severe crisis.
2. Don't look in the rear view mirror to formulate your estimates of liquidity needs. In the last two decades, most bank liquidity crises have been institution specific. Typically a single bank goes through one or more events, such as public announcements of large loan losses that erode the confidence of uninsured depositors who then begin to withdraw their funds. Any Y2K liquidity crisis is likely to significantly different.
Consider that: In a typical institution-specific liquidity crisis, during the 1980s and 1990s, when confidence in a bank became an issue, the funds most often withdrawn were uninsured portions of deposit balances and uninsured loans to the bank such as federal funds sold.
However in a Y2K liquidity crisis, it seems reasonable to expect that insured funds might be withdrawn. Indeed it is plausible that more insured than uninsured deposits might be withdrawn. Some consumers and businesses may withdraw cash because they expect that Y2K computer failures will cause a devastating collapse.
Arguably a much larger number are likely to withdraw cash because they are worried about temporary disruptions in the payment system and want to have more cash on hand for transactions. The key here is that neither group is likely to make different decisions for insured deposits than they make for uninsured deposits. Your contingency plan should assume a level of withdrawals from insured deposits that is no less than the level it assumes for uninsured funds.
In a typical institution-specific liquidity crisis during the 198Os and 1990s, the biggest liquidity headache was deposit withdrawals. However, in a Y2K liquidity crisis, it seems reasonable to suspect that funding loan commitments may be an equal or even larger liquidity headache. Instead of cash reserves, many customers and businesses rely on lines of credit for liquidity. Many consumers and businesses do not keep much extra money in checking, NOW, savings and MMDA accounts. Either they do not have such extra cash or, if they do, they have it invested in CDs, stocks or bonds.
Consumers who want to hold cash in January of 2000 are probably going to get that cash from their credit cards, their unsecured personal lines and their home equity lines.
Businesses who want to hold cash may likely draw down their existing lines of credit. Your Y2K liquidity contingency plan should assume a high level of new advances for existing credit cards and lines of credit.
If there is a Y2K liquidity problem, it will probably impact financial markets, not just individual financial institutions. In a typical, institution-specific, liquidity crisis, like those we saw in the 1980s and 1990s, a bank could easily sell marketable assets like Treasury securities to raise cash quickly. Often the issue for those banks was simply whether or not they had enough marketable assets. The situation in a systematic crisis is quite a bit different.
In a systemic crisis. lots of investors try to sell their marketable securities. As a result, prices for those securities plummet. Your Y2K liquidity plan should not emphasize the sale of marketable securities as a primary source of new funds.
In a typical-institution specific liquidity crisis during the 1980s and 1990s, borrowing from the Federal Reserve discount window was often the funding source of last-resort. Borrowing from the Federal Reserve gave market participants and the public the impression that the bank was in a deep financial hole. Whether or not the bank actually was in serious trouble, the perception created by the Fed borrowing was not helpful.
A Y2K liquidity problem, on the other band, does not reflect more badly on your bank than it does on any other financial institution. It is a systemic crisis. As a result, borrowing from the Fed is not likely to generate a perception that fuels any loss of confidence in your bank.. Borrowing from the Fed discount window should be emphasized in your Y2K liquidity contingency plan.
ESTIMATING YOUR WORST-CASE LIQUIDITY NEED OR LIQUIDITY CONTINGENCY
Planning for Deposits A typical liquidity contingency plan focuses on some percentage of deposit loss. In other words, it might look at the impact of twenty, forty or sixty percent losses in uninsured funds. For your Y2K liquidity contingency plan, it might make more sense to look at fixed dollar losses. If potential deposit losses are driven more by a desire to hold cash for transactions than by a loss of confidence in the system. It might make more sense to base your estimate of deposit losses on the number of customers ...
Loan Funding Here are four suggestions for estimating the amount of worst-case Y2K loan funding demand ...
VERY INTERESTING READING http://www.frbsf.org/fiservices/cdc.local/cash/contingency.html
Some other interesting links:
FED Wants Better Risk Monitoring at Big Banks WASHINGTON, June 24 (Reuters) - The Federal Reserve said on Thursday it has asked banking supervisors to improve their monitoring of risk-taking by big, complex banks that account for a growing share of U.S. banking assets ... http://www.techstocks.com/~wsapi/investor/reply-10275104
BIS: Basle Committee on Banking Supervision Planning by Financial Market Authorities for Year 2000 Contingencies http://www.bis.org/ongoing/contplan.pdf
Banks Fear Shortage of Armored Cars to Haul Cash SUV Vehicles?? ... The Federal Reserve Bank of Minneapolis, which dispenses cash to banks, isn't happy about the security risks involved in moving large amounts of money in civilian vehicles and is discouraging banks from doing it. However, the Fed doesn't have the power to prevent banks from transporting money that way ... http://www.techstocks.com/~wsapi/investor/reply-10201998
-- Cheryl (Transplant@Oregon.com), July 14, 1999.
<< perhaps adding a couple of tenths to GDP in 1999 and perhaps subtracting a couple of tenths in 2000,'' Parry said, noting that planning for the date change has led to a surge of new equipment orders this year. >>
Funny - Intel posted its quarterly report just recently, and I certainly saw no "surge in new equipment orders " that was reflected in Intel's general earnings this past quarter, nor the previous quarter. They were up slightly, but no "surge". And if chips aren't being bought, just what kind of "new equipment orders" is he talking about?
-- Robert A Cook, PE (Kennesaw, GA) (firstname.lastname@example.org), July 14, 1999.
"And if chips aren't being bought, just what kind of "new equipment orders" is he talking about?"
-- Robert A Cook, PE (Kennesaw, GA) (email@example.com), July 14, 1999. ___________________________________________________________________
I just checked with the local pet store, and Y2k Pro told me their had been a HUGE surge in the sale of hampsters and those wheely things they run on.
-- Y2Kprogotanewjob (firstname.lastname@example.org), July 14, 1999.
Just wondering if these are " clueless comments" as cory speaks of or are they calculated........?
-- kevin (email@example.com), July 14, 1999.
Well kevin, I vote for a combination of both.
-- Will continue (firstname.lastname@example.org), July 14, 1999.
Don't have time to finish this thought right now, but let me hear your thoughts on this:
I heard part of NPR piece this week (I think about the recent UN report on world computer/interent use), and they said that 50% of the world's computing power is in the US.
That means that 50% of the worlds potential Y2K failures will be in the US, with the other 50% distributed across the world. Say 30% of those are in the other G6? (pick a number)
Now it can be argued that the computers elsewhere are more heavily relied on here, I suppose. But, still doesn't that seem like we ought to rethink the cascading effect of foreign failures? Sure failures in certain "bottlenecks" could cause major problems, but I bet most of those chokepoints are owned by multinational corps. At first glance, it would seem that the rest of world is at a far greater risk from US failures.
I dunno. I was just really struck by that 50% figure. Have to find a link tommorrow. What am I missing?
Damn. late agin.
-- Lewis (email@example.com), July 14, 1999.
Y2K is so boring that we have these incredible emergency liquidity scenarios....yawn. I have revised my opinion of Parry. HE is deliberately lying.
-- Mara Wayne (MaraWAyne@aol.com), July 14, 1999.