http://www.worldnetdaily.com/bluesky_dougherty/19991115_xnjdo_white_hous.shtml

White House denies bank-closing plan President has authority to declare national holiday

By Jon E. Dougherty ) 1999 WorldNetDaily.com

The Clinton administration is not considering a presidential proclamation to close banks in case of a widespread run to withdraw money due to Y2K-related fears, according to White House and other officials who spoke with WorldNetDaily. A spokesman for the President's Council on Year 2000 Conversion said her office had not been notified by the president that such an action was under consideration, nor had it been recommended.

"I've never heard anybody mention it or even the possibility of it come up," she said.

Title 12 of the United States Code grants the president the authority to declare a national holiday, thereby closing all member banks within the Federal Reserve system, "to provide for the safer and more effective operation of the national Banking System. ..."

A spokesman from the U.S. Treasury Department also confirmed to WorldNetDaily that indeed the Clinton administration had not mentioned the possibility of a banking holiday, should consumers make a run on cash.

"Nobody from the administration has mentioned such a possibility to us," he said. He also denied knowing whether or not the Federal Reserve had placed any orders with Treasury to print more money as a hedge against a possible run. Earlier reports said the Fed was planning to have about $80 billion in extra reserves distributed to banks before the end of the year. Some reports have put that amount at nearly $150 billion.

Llewellyn Rockwell, president of the Ludwig von Mises Institute and a columnist for WorldNetDaily, said he wasn't as concerned about the president declaring a banking holiday as he was about an exodus by the public to redeposit cash reserves after fears over Y2K subsided.

"I don't see Clinton believing he can get away with declaring a banking holiday and preventing the public from accessing their own money," he said. "The American public wouldn't let him get by with it."

"In fact, banks are planning to be open Jan. 1, 2000" in an effort to demonstrate confidence in the system, he said.

However, Rockwell said the potential for hyperinflation as a result of massive redeposits of cash "could potentially be very devastating" to the country's economic infrastructure.

Federal Reserve Chairman Alan Greenspan cautioned Americans not to withhold or withdraw "inordinate amounts of cash."

"I'm sure that people will get very wise soon and recognize that the last thing you want to do is to draw inordinate amounts of currency out of the banks," he said, noting that people who have large cash reserves may be become subject to robberies by thieves who "see an opportunity to get their hands on some real cash."

President Clinton also reassured Americans during a White House press conference Nov. 10, stating that there would be "no major national breakdowns" of computer systems at the end of the year, including the country's banking system.

Expressing confidence that the government is fully prepared for the Year 2000, Clinton said, "The American people can have full faith that everything from air traffic control systems to Social Security payment systems will work like they should."

"I expect we will experience no major national breakdowns as a result of the year 2000 date change," Clinton told reporters on the White House south lawn. He did say that several local governments, hospitals and small businesses are lagging behind in making Y2K-related repairs.

John Koskinen, Clinton's senior Y2K adviser, said organizations that adopted a "wait and see attitude" toward Y2K compliance were "basically asking for trouble." Other experts have warned that Y2K-related financial problems may be exacerbated by any "run" on cash.

Jon E. Dougherty is a staff writer for WorldNetDaily.

-- Uncle Bob (UNCLB0B@Tminus46&counting.down), November 15, 1999

Answers

I bet Greenspan held Monica down while Bill didn't screw her.

Gettim, Ed, GETTIM.

-- Colin MacDonald (roborogerborg@yahoo.com), November 15, 1999.

This is what we in the business call a "non story."

-- Buster Collins (BustrCollins@aol.com), November 15, 1999.

"However, Rockwell said the potential for hyperinflation as a result of massive redeposits of cash "could potentially be very devastating" to the country's economic infrastructure."

Huh?

If there's only a maximum of 3% cash in the system in the first place, how can the ebb and flow of 3% cause hyperinflation?

Oh,yeah-those people that paniced/prepared-it's THEIR fault we're in this mess.

-- Sam (Gunmkr52@aol.com), November 15, 1999.

ANy worries about hyper inflation when the cash in circulation gets re-deposited clearly are caused by a total lack of understanding in terms. Re-depositing, or depositing, or withdrawl of cash to or from the banks is TOTALLY TRANSPARENT to the money supply, because the money supply is defined as the TOTAL OF DEMAND DEPOSITS (including such things as MOW accounts, etc.), SAVINGS DEPOSITS AND CASH!!!!!

Therefor, if all you are doing is shifting from one component to another in the total, which component you are holding at any time is immaterial.

SHEESH and this guy wants to be taken seriously!!!!!

HOOY BOOY!!

Night train

-- jes an ol econ graduated footballer (nighttr@in.lane), November 15, 1999.

One important thing to consider here.......

"Nobody from the administration has mentioned such a possibility to us," he said. He also denied knowing whether or not the Federal Reserve had placed any orders with Treasury to print more money as a hedge against a possible run. Earlier reports said the Fed was planning to have about $80 billion in extra reserves distributed to banks before the end of the year. Some reports have put that amount at nearly $150 billion.

So the guy doesn't keep up with the news within his own department, eh? Looks like gubmint smoke-blowing at its best again :(

-- Beached Whale (beached_whale@hotmail.com), November 15, 1999.

(Expressing confidence that the government is fully prepared for the Year 2000, Clinton said, "The American people can have full faith that everything from air traffic control systems to Social Security payment systems will work like they should.").

If we use The Presidents definition of "S e x" as a basis for this statement, we can easily conclude that the range of US "Y2K OK" stuff lies between So(in Social Security) and TR(Traffic control). This would leave everything from "A" through "SN" and "TRB" through "Z" as possibly questionable. Lets just hope that he was not refering to the abreviations of "SS" through "TC". We would really be scre-wed then.

-- Ned P Zimmer (ned@nednet.com), November 15, 1999.

Sam,

You have a good point there about the 3% or so of the money supply that is in actual cash form. If there is actually a risk of hyperinflation, that risk could also be a result of the following:

http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=001Q8K

[snip]

http://www.bog.frb.fed.us/BoardDocs/speeches/1999/19990917.htm

The Century Date Change Special Liquidity Facility of the discount window that was approved by the Federal Reserve Board in July and the contingency actions of the Federal Open Market Committee announced by the Federal Reserve Bank of New York on September 8 should help to ensure an ample supply of liquidity and relieve funding pressures.

Just what actions were taken? See the following article:

http://biz.yahoo.com/rf/990831/7d.html

[Fair Use: For Educational/Research Purposes Only]

Tuesday August 31, 6:28 pm Eastern Time

NYFed raises Treasuries lending limits for dealers

By Isabelle Clary

NEW YORK, Aug 31 (Reuters) - The Federal Reserve Bank of New York said on Tuesday it will allow U.S. primary dealers to borrow a much bigger chunk of the central bank's portfolio of U.S. Treasuries, starting after the Labor Day weekend.

Although the Fed did not specifically cite concern over financial markets' potential funding problems related to the Year 2000, traders said the near-doubling of the amount of Treasuries dealers can borrow daily under the Fed's System Open-Market Account (SOMA) program was likely related to Y2K fears.

``The limit per Treasury issue will be raised to 45 percent of the total (Fed's $490-billion Treasury portfolio) holdings from 25 percent, effective September 7,'' a New York Fed spokesman said.

The New York Fed created the SOMA program in 1969 to allow U.S. primary dealers -- the brokerage firms that deal directly with the Fed and are market-makers in U.S. government securities -- to borrow U.S. Treasuries from the central bank's portfolio overnight through bidding at daily auctions with a noon deadline.

The SOMA program helps alleviate market disruptions such as the ones that may be related to scarce Treasury issues trading ``on special'' or at a premium in the repo market.

``The rationale for the decision remains the same, to provide a secondary and temporary source of securities to the Treasury financing market in order to promote smooth clearing of Treasury securities,'' the spokesman added.

But dealers said this was the latest effort by the Fed to ensure smooth financial markets ahead of the year-end when portfolio managers are expected to be exceptionally cautious with their counterparties.

``I think Y2K will have a very big effect over the year-end relative to the Treasury issues that are scarce,'' a repo trader said. ``It's a good move by the Fed.''

On April 26, the New York Fed had taken a first step to broaden its SOMA program by raising the amount of Treasuries any primary dealer can borrow from the Fed's portfolio to $100 million per issue and $500 million per firm.

``Since the program was revamped in late April, primary dealers borrowed $77 billion worth of Treasuries or an average of $900 million overnight,'' said the New York Fed spokesman. ``The new program went very well.''

The Fed has already beefed up its cash coffers to meet any unusual surge in demand for paper money ahead of the year-end and also opened a special ``don't-ask-don't-tell'' discount window operation where banks will be able to borrow large amounts of funds at 150 points above the 5.25 percent Federal funds rate.

The New York Fed had said it retained the right to reject bids if it felt a dealer was bidding for a specific issue in an attempt to squeeze that issue.

----------------------------------------------------------------------

[snip]

-- Linkmeister (link@librarian.edu), November 15, 1999.

When President Clinton made his little "Everything's OK" speech last week, I thought to myself that the only thing that could have made it more unbelievable was if he said "Trust me."

While reading this post, I just realized that he said just that:

Clinton said, "The American people can have full faith (in him??) that everything from air traffic control systems to Social Security payment systems will work like they should."

"Trust me"

-- Clyde (clydeblalock@hotmail.com), November 15, 1999.

Never believe anything until it has been officially denied. :-)

-- A (A@AisA.com), November 15, 1999.

Wow! A holiday! Wonderful...let's all go to the beach. I sure hope the surf is up... (A proper attitude for those of us who have prepared...)

-- Mad Monk (madmonk@hawaiian.net), November 15, 1999.