BANKS FEAR SHORTAGE OF ARMORED CARS TO HAUL CASH
The nation's banks have a new Y2K worry: A potential shortage of armored cars could force them to take their cash into their own hands and carry it around in sport utility vehicles.
Some bank officials say they believe consumers will want to withdraw more money at year end, which combined with their normally high year-end cash infusions from retailers will yield a shortage of armored cars to do all the stashing and hauling ...
But why would conservative bankers get involved as such risky business as moving money in Chevy Suburbans? Because they realize that public confidence depends on banks having enough cash on hand to meet any Y2K withdrawal requests. And some bank officials say they believe it would be better to pile cash into the back of a SUV than to risk running out of money because there aren't enough armored cars to deliver it.
The Federal Reserve Bank of Minneapolis, which dispenses cash to banks, isn't happy about the security risks involved in moving large amounts of money in civilian vehicles and is discouraging banks from doing it.
However, the Fed doesn't have the power to prevent banks from transporting money that way.
Louis Barton, Y2K program director for Frost National Bank in San Antonio, said he attended a March banking conference in Dallas to discuss alternatives to using armored cars.
"The Fed may discourage the idea, or not like it. But we say that, once it's prearranged, a bank can hire an armored guard, put him in a Chevy Suburban and go pick up the cash. It's a legitimate Y2K contingency plan," Barton said ...
But Duane Carter, assistant vice president of cash services at the Fed Bank of Minneapolis, said the Fed doesn't like the SUV scenario for several reasons: It would be hard to identify people in a sport utility vehicle as authorized bank customers with the right to withdraw money; the sheer number of vehicles that might come to the Fed might cause problems; and there are big liability questions if something happened to the money after it left the Fed in a commercial vehicle ...
The armored car industry has told bankers and the Fed that it isn't planning to buy more vehicles or hire more people to handle the Y2K rush ...
The Fed would like banks to avoid the entire problem by ordering extra currency from the Fed well before the end of 1999, thereby avoiding an armored car shortage. But that would be costly to banks, who by storing extra money in their vaults would be giving up interest they could have earned by investing those funds. As a result, some banks have decided not to build up inventories of cash early, Carter said.
As a result, bankers have been asking the Minneapolis Fed about contingency plans that call for using non-armored civilian vehicles for transporting cash ...
As part of its Y2K plans, the Fed has promised to stash some of its cash at undisclosed locations outside the heavily guarded Federal Reserve Bank. The idea is that some armored cars could pick up the money more quickly from those locations and deliver it to banks. Carter said locations haven't been chosen, but the only two choices available are the vaults of commercial banks and the vaults maintained by the armored car companies.
But once the money is in the vault of an armored car firm, that company can transport the money in any vehicle it likes. As a result, if a bank needed money badly enough to want it delivered in a vehicle provided by the bank, an armored car firm would be free to honor that request, Carter said ...
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Cheryl
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