Fed governors approve special loans for possible Year 2000

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WASHINGTON (AP) - The Federal Reserve Board has approved a plan to make special loans to banks, thrifts and credit unions that might need emergency money because of consumers' fears about the Year 2000 date change.

The central bank's governors on Tuesday voted, 5-0, to offer the special loans to financial institutions from Oct. 1 through next April 7.

In response to comments it recently received from the public on a proposal, the Fed decided to move up the program's starting date from Nov. 1 as first proposed to Oct. 1.

Of the 93 comments received since late May, all but three favored the loan program, the Fed noted in a statement.

The plan should help banks, thrifts and credit unions ``more confidently commit'' to making loans to other financial institutions and to businesses through the transition to the new century, the statement said.

It was the second major step taken by the central bank designed to avert possible Year 2000 disruptions in the nation's banking system.

Last year the Fed ordered an additional $50 billion of new currency to put into circulation in the event people make a run on banks and automated teller machines late in the year. By year's end, $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.

For the special Year 2000 loans, the interest rate charged by the Fed will be slightly higher than the prevailing ``federal funds rate,'' currently at 4.97 percent, which banks charge each other for overnight loans.

Banking industry officials have said the special loans would provide an extra cushion of cash to the system as a backup if needed, although the industry anticipates that very few banks will have to use it.

The Fed has acknowledged that uncertainty surrounds potential developments during the transition period because of the millennial date change. But it has stressed that it does not expect widespread or prolonged computer disruptions from the technology problem, caused by the possibility that some computers originally programmed to recognize only the last two digits of a year could interpret 2000 as 1900.

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Snip:

"In response to comments it recently received from the public on a proposal, the Fed decided to move up the program's starting date from Nov. 1 as first proposed to Oct. 1."

Gee, I wonderr why !1

Ray

-- Ray (ray@totacc.com), July 20, 1999

Answers

http://dailynews.yahoo.com/headlines/ap/technology/story.html?s=v/ap/1 9990720/tc/y2k_federal_reserve_1.html

-- Linkmeister (link@librarian.edu), July 20, 1999.