The banking panic happened in the "Savings and Loans" sector. Their insurance company, the FSLIC, did not have enough reserves to pay for the illiquidity they created by borrowing short and loaning long. The government's expansionary money policy and merger of FSLIC and FDIC helped reliquify the system at a huge income tax and inflationary cost.
Today, the FDIC has reserves to handle approximately 1% of the banks from failing. Therefore, the appearance of coverage is transparent and the depositors have misplaced their trust.
I agree with your statements regarding the greater efficiencies which will come with the replacement of outdated software and hardware.
My concern with Y2K lies with transactions, both here and abroad. Alan Greenspan has already told the banking community that ANY institution which is not compliant will not be able to hook up to the banks lifeline known as the FEDWIRE. The FED doesn't want any non-compliant systems "infecting" theirs with bad data. Earlier this year, a poll showed that 83% of banking institutions thought that Y2K was a non-event and have barely begun to address this problem.
How this relates to silver is that as people withdrawl money out of the banking system in 1999, the currency will gravitate toward storehouses of wealth like the metals.
The process to become Y2K compliant first begins with the thought of you may not be compliant. Then the process proceeds with cataloging the uncompliant software, repairing or replacing the code, and finally testing. Testing is by far the most time consuming part of the process taking about 50% of the time. Many small/medium size companies which began early will make it. Others which haven't reached the testing process by this time next year you can kiss goodbye. Part of the problem lies with the short supply of qualified Cobol and Fortrans computer language programmers.
For more info, look up the Gartner Group since they are the people who are watching businesses and gov't compliance the most closely. They praise the good companies and chastise the ones falling behind. They are not there for doom and gloom but for information.
Have I told you the story of me becoming a multimillionaire this year (For 15 minutes)? When I was on vacation in Europe, Smith Barney decided to test if they were Y2K compliant. Their test immediately added $19 million into each and everyone of their 525,000 accounts, including mine. I'm sure that they are glad they conducted this test on a closed system! The story aired on CNN on June 5, 1997.
As of today there is not one major compliant US bank, utility company, or Fortune 500 firm. Personally, I hope they all can become compliant. There is no silver bullet available which will correct this problem. There are many challenges ahead.
I was estatic to read new legislation proposed by one of the Utah State Senators. He wants all publicly traded corporations to state their progress on their Y2K fixes in SEC documents like quarterly and annual reports. The significance which I affix on this proposed legislation is that the additional interest generated in Y2K means that more will be done and we will have less of a negative Y2K impact.
Larry Haraksin |
