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Jeff Jinnett, a lawyer specializing in y2k matters, on July 10 told members of the Subcommittee on Financial Services and Technology of the Senate Banking Committee that consumers are at risk. His list of risk areas is formidable. (Consider: Jinnett is an optimist who repeately discounted any "doomsday" scenario, despite the fact that his list of actual risk areas is long and his list of compliant systems was nonexistent.) This is a very long setence:
"U.S. consumers may be faced with the following risks arising out of the disruption of normal operations of financial institutions, among others: (a) loss of transaction records, disruption of wire transfers, miscalculation of transactions impacting savings, checking and brokerage accounts, and miscalculation of interest with respect to mortgages, bonds and other instruments, (b) inability to access bank funds when needed, which could be especially critical if welfare and other public assistance benefits are delivered electronically, (c) increase in unemployment due to failures of small businesses unable to become Year 2000 compliant in time, (d) diminution of value of stock market holdings due to a Year 2000 computer problem "bear market", and (e) disputes with the U.S. Internal Revenue Service over underpayment of taxes on tax filings using incorrect calculations received from non-compliant third party financial institutions. In addition, to the extent there are bank failures due to the Year 2000 computer problem, U. S. taxpayers would ultimately "foot the bill" for any Federal bail-out efforts, as occurred in connection with the savings and loan crisis. In this regard, it should be noted that if a bank were to fail, it may be technically difficult for another bank to quickly take over the failed bank's transaction processing due to computer system memory and other capacity limitations and difficulties arising due to use of incompatible account formats" (p. 5).
Then there is the question of compliant banks.
"One Year 2000 expert has estimated that as of March, 1997, only 40% of U.S. banks had begun an earnest assessment of their Year 2000 impact. It appears that some financial institutions are now recognizing that they are late in commencing their Year 2000 corrective work and may not have sufficient personnel and other resources to be able to correct 100% of their computer systems by January 1, 2000" (p. 6).
Then there is the problem of noncompliant chips. You can't fix these chips with a software solution.
"Financial institutions currently face a problem with respect to embedded microcontrollers in non-computer equipment, since they are totally dependent on the equipment manufacturers to identify the location of the microcontrollers, to advise whether the microcontrollers are date-sensitive and will cause the associated equipment to malfunction on or after January 1, 2000, and to provide Year 2000 compliant microcontrollers. In some instances the manufacturers may decide not to expend the money necessary to produce Year 2000 compliant microcontrollers for outdated equipment" (p. 9).
Then there is the threat of a stock market meltdown triggered by large institutional investors making a run on a bank. His solition? Pass a law governing stock market exchange trading rules. (Right: a worldwide panic stock market crash and bank run, and some technical rule governing stock exchanges will solve it. Here is the lawyer's mind in action.)
"The major stock exchanges have adopted and maintain various "collar" and "circuit breaker" controls on trading and program trading in order to reduce excessive volatility in market trading. Given the current flood of "doomsday" articles on the Year 2000 problem and the likelihood that at least some highly publicized systems failures will eventually occur, with resulting litigation, this Subcommittee may wish to reexamine the current exchange trading controls to determine if they are sufficient to maintain an orderly market in the face of an irrational wave of stock selling due to overpublicized Year 2000 worries. A similar review of current banking controls may be appropriate in the unlikely event that a bank suffers a Year 2000 system failure and some depositors become "spooked" and start a "run on the bank". Since the Federal Deposit Insurance Corporation (FDIC) insures deposits up to $100,000, the potential "run" on a bank would more likely be caused by large institutional investors" (pp. 9-10).
Notice the underlying causes of such a run: not the actual existence of a universal technological problem, but rather an "irrational" wave of stock selling due to "overpublicized Year 2000 worries."
Mr. Jinnett is very good at listing problems. His proposed technical and legislative solutions have yet to be implemented. reassured?
Are you willing to sit calmly today, on the assumption that these problems will be solved by the government? Also, do you really think you'll sit quietly and "rationally" when worldwide bank runs and stock market meltdowns threaten everything you own?
My suggestion: better to be rational today than irrational in 1999, let alone 2000.
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