Greenspan Warns Against Year 2000 Bank Withdrawals : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Greenspan Warns Against Year 2000 Bank Withdrawals

Updated 1:43 PM ET July 28, 1999WASHINGTON (Reuters) -

Federal Reserve Chairman Alan Greenspan Wednesday urged individuals to keep their money in the bank at the end of the year, saying the risk of a computer bug wiping out their deposits was smaller than the risk of being robbed.

"I think you will have a far greater chance of losing your money if you take it out than if you leave it in," Greenspan told the Senate Banking Committee.

Those who withdraw their money to guard against possible havoc by the so-called millennium bug will risk falling prey to a new cottage industry, he predicted.

"There will be a new industry that will emerge as a consequence," Greenspan said. "It will be millennium thievery," he added, to laughter from lawmakers.

Financial institutions and other industries dependent on computers have spent months, and in some cases years, reprogramming their computers, fearing that they could fail to recognize 2000 as a valid year and possibly causing havoc.

Greenspan said it was a "very good sign" that recent surveys show fewer people plan to withdraw large amounts of cash from banks at year-end.

He also said he was "far more comfortable" now than he was six months ago that financial institutions would be ready to deal with possible problems if computers malfunction.

He said the U.S. central bank was closely monitoring interest rates of securities maturing around the end of the year, which he said was a good measure of the extent of financial stress that the markets are perceiving as likely to emerge.

Greenspan said there clearly were some "butterfly effects" in rates, since some investors don't want securities that mature right at year-end and are willing to pay a premium for maturities that carry into 2000.

But he said fluctuating rates did not appear to be a troublesome issue.

"They have not yet reached a point where there is evident real stress in the system," Greenspan said, adding that implied to him that market participants were "increasingly more comfortable" about a smooth transition.

However, he also warned against complacency.

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-- Ray (, July 28, 1999


Desperation ploy: If your bank "goes south", you better have cash. And since only 1% to 2% of demand deposits are supported by cash, if you don't have cash now, you won't get it later.

Withdraw early and withdraw often. Got PVC pipe?

-- A (, July 28, 1999.

Once you take your money out of the system, and have it in the form of cash, it is indeed a tremendous burden. Gary North and others are always making light of it, but I can certainly say that between the time that I cashed out and then stored it in a manner to where I feel that it is safe and well protected, it was truly scary.

The fact is, there is always risk in whatever you do with your money. Prior to Y2K, keeping your money in the bank had such a low probability of getting lost, scrambled, or outright unavailable, that I sure would have thought it foolish to not keep it in an FDIC insured account. With the Y2K factor, however, the odds shift the other way dramatically.

If you do decide to take your money out of the system (as I have done), just be sure that you think through how you are going to safeguard it. Paper currency in particular is susceptible to a lot of storage problems (e.g., mildew) that coins are obviously not. And if it does get accidentally destroyed, or stolen, you have virtually no recourse.

-- Jack (, July 28, 1999.

At least Greenspan is looking in the right direction.

Still, until the market tanks you won't see that much stress on interest rates. I'm afraid it's going to be ugly.

"They have not yet reached a point where there is evident real stress in the system," Greenspan said, adding that implied to him that market participants were "increasingly more comfortable" about a smooth transition.

Every day I pull a little more out, and I feel a LOT more comfortable. SMOOTH transition? I hope so, but I just don't think so.

-- nothere nothere (, July 28, 1999.

Don't take cash, write checks for the preps you need. That keeps the banking system afloat and gets you what you need for Y2k. Some of your purchases should be with barter in mind.

Got toilet paper?

-- bw (home@puget.sound), July 28, 1999.

Using checks for preps may be a BAD idea. Remember that all checks are microfilmed, and all info from them is immediately available to the If you are spending inordinate amounts at Sams Club, or buying stuff from companies that are recognized as "survival oriented", it's a red flag.

If you want to remain anonymous with your preps, tell no one, and for God's sake, use CASH.

-- Bill (, July 28, 1999.

Music, thanks for helping to make Y2K a multimedia event!

Wondering who has cornered the market on the signs we'll have to put on our front lawns to let the criminal elements know which homes to rob. I think that may be a legitimate cottage industry in itself.

-- Brooks (, July 28, 1999.

Bill: I've used both checks and cash for numerous preparations. My bank knows fully well what I'm doing. So do certain store cashiers in my city.

Why aren't they stopping me? It's my money. (or was, until I spent it)

-- Randolph (, July 28, 1999.

Music, that tune was priceless. I never heard it before. It cheered me up after some of these depressing posts. Please do it again on other posts.

-- Curly (Curly@3stooges.gom), July 28, 1999.

Does anybody recall Greenspan acting nervous about bank compliance six months ago? If not, does that mean that he wouldn't tell us now if he was still nervous?

-- Dave (, July 29, 1999.

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