by Amara D. Angelica

10/08/98

 

Taboo words

 

Dr. Edward Yardeni, chief economist of Deutsche Bank Securities, has declared Aug. 19 "Global Y2K Action Day" and will host a live Internet audio program (www.yardeni.com/y2kconf1.html) with many of the world’s top Y2K experts. Guests will include Sen. Bob Bennett (R-Utah), Y2K electric industry expert Rick Cowles and John Koskinen, head of the President’s Council on Year 2000 Conversion, which finally has a Web site (www.y2k.gov). The elusive Al Gore may also make a virtual appearance.

 

Koskinen announced a misleadingly labeled "Y2K Job Bank" (http://it.jobsearch.org), which turns out to cover IT jobs in general. He also said the American Association of Retired Persons has agreed to help retired computer programmers who know Cobol, Fortran and other early computer languages link up with companies needing Y2K staffing. But an AARP spokesman was unaware of any specific plans. Koskinen will survey the electric power industry and help coordinate solutions (the top 10 utilities are not prepared, according to a recent congressional report).

 

 

 

•California’s Department of Information Technology (DOIT) says it will cost $240 million to fix state agencies’ Y2K problems. The current-year budget: $55 million. The California Legislative Analyst’s Office warns that DOIT’s estimate excludes embedded chips, underestimates costs, has overly optimistic time lines, and lacks contingency planning and oversight. At risk: $3 billion in DMV revenues, for starters.

 

•To cope internationally, the U.S. financial industry must "reduce exposure" (read: sell off securities) to Y2K-unprepared Asia and Europe, said Tanya Styblo Beder, a principal with Capital Market Risk Advisors Inc., in Senate testimony (http://home.swbell.net/adheath/beder.htm). According to Beder, "49 major Japanese banks planned to spend $249 million as a group on Y2K compliance. This amount is only a fraction of Citicorp’s planned $600-million program." Beder also reported that "38 percent of IT professionals say they may withdraw personal assets from banks and investment companies just prior to the millennium."

 

•In additional Senate testimony, Peter A. Miller, chief information officer of J.P. Morgan & Co. Inc., warned that most nations are lagging in their Y2K preparations, which could have severe repercussions in the financial markets because of interdependencies among the world’s computers and computer networks. Much of J.P. Morgan’s Y2K efforts focus on "addressing external dependencies … and identifying and assessing our year 2000 exposures as posed by clients, counterparties, exchanges, depositories, clearinghouses and correspondent banks, as well as by power, telecommunications and other utilities."

 

•The SEC is scolding companies for submitting meaningless legalese in Y2K disclosures. "Lack of information regarding your preparations for the year 2000 could seriously undermine the confidence investors place in your company," admonishes SEC Chairman Arthur Levitt in a letter to publicly-traded companies. The SEC has also tightened its disclosure requirements. Companies must now disclose their state of readiness, costs to address the company’s Y2K issues, risks to the company and the company’s contingency plans.

 

•Speaking of investor confidence, we reported in this column on July 27 that the Securities Industry Association completed a successful simulated test of trading by Wall Street brokerages and exchanges. Former stock broker Paul Milne responded: "The ‘test’ on Wall Street in no way whatsoever tested their ability to conduct business. ... It was a test of whether the ‘testing tools’ will function properly ... Read Jim Lord’s explanation. (See "Did Wall Street Pass the Test?" www.y2ktimebomb.com/Tip/Lord/lord9830.htm.) We stand corrected.

 

•Y2K experts are finally saying the two taboo words: "bank run." The Boston Business Journal reports that Boston-based State Street Bank & Trust Co. Chief Economist Fred Breimyer is concerned that public fears about Y2K-crippled computer systems could cause widespread bank runs next year. Breimyer says the Federal Reserve System is worried and the Treasury Department is printing extra currency, especially in large denominations, such as $100 bills.

 

•Reynolds Griffith, professor of finance at Austin State University in Texas (http://cobweb.sfasu.edu/~rg/prepprob.htm), recommends accumulating a cash reserve that could cover expenses for one or two months. "If all 100 million households did that, it would mean $500 billion to $600 billion [in] cash withdrawals," says economist Gary North (www.garynorth.com), but bank reserves total only $53 billion.

 

 

 

 

 

Most ATMs—if they’re still working—only let you get $200 or $300 a day. No word on how much cash can fit under a median-sized mattress.