Y2K Update

By Christian Financial Concepts | July 7, 2008 | 8:02 PM EDT

Can we talk?

The White House launched a nationwide campaign, urging local communities to hold town hall-style meetings on Y2K. "Americans want to know how the important local services upon which they rely may be affected," said John Koskinen of the President's council on Year 2000 Conversion at a May 24 news conference.

Mr. Koskinen, often called America's "Y2K Czar," hopes the "Community Conversations" campaign will encourage government leaders, utility executives, hospital officials, and business owners to start talking with their constituents and customers about the Y2K problem. "Our goal is for participants to share factual information about what's been done, what remains to be done, and what additional actions a community should take as a result," Mr. Koskinen said, noting that if officials "won't answer questions, [citizens] have cause to be concerned."

The Y2K Council is offering a free "toolkit" to help local leaders organize and promote the Community Conversation meetings. Included is a videotape of introductory remarks by President Clinton. Copies of the toolkit an be ordered by calling 1-888-USA-4-Y2K (1-888-872-4925), or by going to the Council's web site.

The news isn't good

At a May 25 hearing, the Senate's Special Committee on the Year 2000 Technology Problem focused its attention on news coverage of Y2K.

Senators heard indictments from grassroots Y2K activists about how reporters have mishandled the Y2K story. "Articles and interviews often ridicule those who choose to make preparations to survive a hardship or crisis," said Liza Christian, former director of the Rogue Valley (Oregon) Y2K Task Force. "They are labeled 'doomsayer,' 'wacko,' 'alarmist,' 'nutcase.'"

Ms. Christian complained the media have tended to swing from hostility to indifference on Y2K and have failed to do significant investigative journalism. "In our experience, the media [are] looking for sound bites and headlines," she said.

Sen. Christopher Dodd (D-Conn.), co-chair of he Y2K Committee, expressed similar concerns. "There are those who want to make [Y2K] a national joke. It's no joke. There are serious implications for the country." Later witnesses, including journalists and researchers, agreed with many of the complaints about poor news coverage. But they said the government must share the blame because it has released conflicting information about the seriousness of the problem.

"Keeping the public guessing about what they should do about Y2K is, in my view, the surest road to panic," warned Lawrence McGill, research director of the Freedom Forum's Media Studies Center. Several witnesses laid particular blame at the door of the Clinton Administration. "The political leadership has abrogated its responsibility," charged James Adams, chief executive officer of Infrastructure defense, Inc., publisher of the Y2K Today web site. "President Clinton, the leader of the world's most powerful nation, and Vice President Gore, the technology champion, have kept a very low profile [on Y2K]. . . . In this vacuum, it is not surprising that the media have been doing a pretty shoddy job."

'No one is laughing' now

The CBS News program 60 Minutes aired a sobering report May 23 on Y2K's potential impact on local governments.

"When we did our first story last fall on Y2K. . .a lot of people still thought it was a joke," said reporter Steve Kroft in his introduction. "Today, no one is laughing."

The report focused on the governments of the District of Columbia, said to be one of the least-prepared for Y2K, and Montgomery County, Maryland, considered to be one of the best prepared. Mary Ellen Hanley, Y2K coordinator for the District, said the nation's capital is preparing contingency plans for possible breakdowns in everything from welfare benefit distribution to electric power. Asked whether a power outage of one to two weeks is possible, Ms. Hanley replied, "Right now, we don't think it's impossible."

The 60 Minutes report also featured an interview with Sen. Robert Bennett (R-Utah), chairman of the Senate Special Committee on Y2K. Although he acknowledged tremendous progress toward Y2K readiness, he warned that serious problems still could occur.

"The dire predictions will probably be fulfilled, but on a sporadic basis, place by place. If you're in one of those places, the fact that the overall system works is not going to be very comforting to you," he said.

Ready cash

Credit unions will have access to special Federal Reserve loans, just in case customer demand or Y2K cash exceeds supply, according to an agreement announced by the Federal Reserve and the National Credit Union Administration. The loans would be available only as a last resort, after all other means of borrowing are exhausted. The agreement comes in addition to congressional action that will allow local credit unions to borrow higher than usual amounts from what's known as the Central Liquidity Facility, a source of short-term, emergency loans for credit unions.

The Fed also is proposing a special program for banks that may need emergency cash. The proposed Century Date Change Special Liquidity Facility would be in operation from November 1, 1999 through April 7, 2000. In an interview with Dow Jones Newswires, Federal Reserve Governor Roger Ferguson said the Fed wants the American public "to be confident that plenty of cash will be available." He stated that the Fed "will be prepared to provide currency, whatever the level of demand might be." Not ignoring the possibilities, A May 25 report from the Securities Industry Association (SIA) urged investors and securities firms to prepare for possible trading and paperwork disruptions related to Y2K. The report stresses, however, that such disruptions are unlikely.

"We are very well positioned to deal with the century date change," said Gerald Corrigan, chairman of the SIA's Year 2000 contingency planning, quoted by The Washington Post. "Still, you simply can't ignore the possibilities." The possibilities, according to the report, range from local power failures to the disruption of entire central-bank systems.

The 85-page SIA report offers a list of suggestions for ways that securities firms can minimize any problems that may occur in transactions, such as issuing mutual fund distributions before Christmas rather than at year's end.

Although SIA is recommending that investors protect themselves by keeping hard copies of personal records, the group is discouraging investors from obtaining actual stock certificates. Other records, the SIA insists, will provide an adequate paper trail, if needed.

Small firms lagging; big companies readying for crisis

Progress on Year 2000 readiness among small manufacturers, is "a mixed bag," according to National Association of Manufacturers (NAM) President Jerry Jasinowski.

A NAM survey found that only 60 percent of 10,000 firms polled have Y2K-compliant accounting systems thus far. "We also are concerned that 40 percent see no need for contingency planning," Mr. Jasinowski said at a news conference. Fifty-five percent of small manufacturers reported that their shop floor systems are already prepared for the Year 2000.

The poll also showed that only about 15 percent of small firms plan to boost inventories to prepare for possible Y2K-related disruptions in supplies. Meanwhile, the latest Y2K readiness survey from Cap Gemini America, a technology consulting firm, found that the number of major companies planning to build Y2K crisis management centers has doubled since December. Eighty-five percent of America's biggest firms now plan to build such centers to oversee implementation of Y2K contingency plans.

Another finding from the Cap Gemini poll: 87 percent of responding companies said it is "very likely" or "potentially likely" that they will refuse to do business with noncompliant suppliers and partners.

Trust, but verify

Under pressure from concerned citizens and members of Congress, the Food and Drug administration (FDA) announced it will audit some of the self-reported Y2K readiness data supplied by medical device manufacturers.

However, William Hubbard, acting deputy commissioner for policy at FDA, told a joint hearing of two congressional subcommittees that the agency believes that Y2K problems in medical devices are not as serious as some have claimed. "Year 2000 problems with medical devices will not be significant or widespread if facilities take appropriate actions to address this issue," he said.

Printed with permission from Christian Financial Concepts.