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Comment: |
Andrew Tobias reports on a warning from an FDIC attorney he knows.
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"Don’t be too complacent that American financial institutions are addressing the Y2K problem. The FDIC has already issued a ‘cease and desist order’ against an institution whose board has done nothing, so far, to investigate whether its systems are Y2K compliant. This is just the beginning of FDIC’s push to get the bank and thrift industry in shape; this is a very serious potential problem. Just having the big banks, like Citibank, in compliance is not enough. All banks and thrifts in the economic food chain (and credit unions, too) must be compliant or the little non-compliants will drag down the big compliants.
"An analogy would be GM, building cars utilizing the ‘just in time’ parts supply assembly process. Recently, one tiny parts supplier suffered a strike. The little company temporarily ceased production, and that, in turn, stopped GM’s production of a line of cars for lack of that part.
"If smaller, correspondent banks can’t participate overnight with the clearinghouse and the big banks, then there will be a major liquidity problem first, with other problems to follow. Remember back when Penn Square Bank failed in Oklahoma City in the early 80’s? In and of itself it wasn’t a big bank or big failure, but its failure was a direct cause of the failure of Continental Bank in Chicago, a real biggie in its time."
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