Mild Effects Predicted for Y2K

The year 2000 computer glitch could nudge the economy a couple tenths of a percent--in either direction--over the next year, although it is unlikely most consumers will even notice the changes, San Francisco Federal Reserve Bank President Robert T. Parry said Tuesday.

“There are both positives and negatives,” he told reporters at a luncheon sponsored by Town Hall Los Angeles.

Parry forecast a series of mild movements in the economy resulting from the so-called millennium bug.

That’s in sharp contrast to some economists’ dire predictions that the glitch will set off a global recession over the coming year.

Parry, head of the largest of the 12 districts in the Federal Reserve system, said there appears to be many small forces at work whose impact is difficult to determine.

Computer sales might weaken next year, since some businesses accelerated planned upgrades of their computers to deal with the year 2000 problem.

On the other hand, many computer projects, which have been delayed because of the repair work, could begin next year with renewed vigor.

Asked about the possibility of major economic upheaval, Parry said: “I find that quite unlikely.”

The banking industry, he said, is nearly finished with its year 2000 work.

Out of more than 10,000 banks and financial institutions in the country, about 150 have not completed testing and upgrading, he said, using figures from a federal survey at the end of May. Industrywide, the completion rate is about 98.3%, he said.

The Federal Reserve Bank completed repairs on all its mission-critical computer systems before the June 30 federal deadline, he said.

Parry did note that the Federal Reserve is preparing for some systemic problems that might arise as the turn of the century nears.

The banking system will have an extra $50 billion in cash on hand during the New Year’s holidays, for instance, in case people hoard cash in anticipation of year 2000 calamities.

But Parry said: “I don’t think it’s a good idea to take a lot of cash out of your bank and put it under your mattress. The Federal Deposit Insurance Corp. does insure up to $100,000 of your money in the bank--but it doesn’t insure your mattress,” he said.

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You can listen to San Francisco Federal Reserve Bank President Robert Parry’s speech at Town Hall Los Angeles on The Times’ Web site at http://pyxis.nohib.com./townhall-la.