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Greenspan: Y2K fears ease
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September 17, 1999: 12:51 p.m. ET
But Fed chief says disruptions to industry, consumer attitudes still loom
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NEW YORK (CNNfn) - Federal Reserve Chairman Alan Greenspan said Friday any threat of the Y2K computer glitch causing widespread failure is now "negligible," but warned of limited market uncertainty and industrial bottlenecks.
"As a consequence of our current dependence on computers, some Y2K-related failures could have noticeable effects on the economy," Greenspan said Friday in a speech to the financial sector group of the President's Council on Year 2000 Conversion.
However, the Fed chief added that "the probability of a cascading of computer failures in mission-critical systems is now negligible."
Greenspan said pockets of consumer fear about the date change's impact on computers, and corporate changes to delivery timetables would be the most likely culprits for any economic impact. But he emphasized the damage should be minimal.
The Y2K problem could cause computers to read the last two digits of 2000 in their systems as 1900 -- possibly leading to shutdown.
The private sector has spent an estimated $50 billion to upgrade computer systems, Greenspan said, while the Fed agreed in July to fund a special reserve to resolve any liquidity woes near year-end.
Several companies have stepped up their plans to issue debt in the corporate bond market this year to avoid Y2K-related complications at year end.
Echoing President Franklin Roosevelt's Depression-era speech that only fear itself is to be feared, Greenspan suggested consumers shouldn't make any rash moves -- such as cashing out their bank accounts -- as the millennium nears.
"The potentially most important piece in the Y2K puzzle for the rest of the year is the uncertain response of the American consumer as the year-end approaches," he said.
The central bank chief said that only a small number of Americans are telling pollsters that they plan to build large stockpiles of food, water, fuel and cash as Jan. 1 approaches.
Greenspan stressed that some consumers could become unnerved and want to pull out their money from bank accounts, but said that such a reaction is ill-advised and opens the door to fraud or crime.
"I trust that such withdrawals will be modest since, as I have said before, the safest thing for consumers to do with their money around year-end is to leave it where it is," he said.
The speech came shortly after federal banking officials announced the system is prepared for the date change. Greenspan said a small number of banks that have not completed their preparations are receiving supervision to avoid any problems.
-- from staff and wire reports
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