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To: Alex who wrote (7910)	2/26/1998 3:55:00 PM
From: John Mansfield	Respond to of 116764

Any of you POG specialists care to comment? exchange2000.com Thanks! Regards, John ___________ 'Partial transcript of Greenspan 2-25-98 testimony: <snip> GREENSPAN: Senator, you're quite correct in saying this is really a unique event in that we have no precedential capabilities of evaluating it. We do know certain things. If the chairman is going to do a mea culpa, I'll do a mea culpa, too. I'm one of the culprits who created this problem. I used to write those programs back in the '60s and '70s... (LAUGHTER) ... and was so proud of the fact that I was able to squeeze a few elements of space out of my program by not having to put 19 before the year. And back then it was very important. We used to spend a lot of time running through variousmathematical exercises before we started to write our programs so that they could be very clearly delimited with respect to space and the use of capacity. It never entered our minds that those programs would have lasted more than a few years. And as a consequence, they are very poorly documented. If I were to go back and look at some of the programs I wrote 30 years ago, I mean, I would have one terribly difficult time working my way through step by step. And to try to infer how one reads a program, when there are lots of alternate ways of doing things and all you've got is the code in front of you, is not simple. It, therefore, is a very difficult problem to get your hands around. We do know that if every individual institution were separate and not interrelated, we wouldn't care all that much. GREENSPAN: The trouble is that there is a perversity of incentive in this type of problem in that you can be extremely scrupulous in going through every single line of code in all of your computer operations, make all the adjustments that are required and get essentially a system, whether you are a bank or an industrial corporation, and say we have solved the 2000 problem, and then find that when the date arrives, all of the interconnects that are now built in start to break down. So, it's not an issue of getting -- of being worried that there is a large number of non-compliers who haven't gone through the system. You can end up with a very small number of non-compliers and have a very large problem. We know that a lot of the countries abroad have smaller problems than we do because they are buying -- a substantial part of their systems are newer equipment which already embodied much larger capacities and got -- didn't have to use two digit, but could use four digits for purposes of defining what year it was. - I'm quoting -- "believes that of the newer equipment is without difficulty. We, nonetheless, have such a large, high degree of uncertainty about what actually is out there that we cannot but employ very substantial amount of resources to find means to reduce the probability of the inevitable difficulties that are going to emerge. In measuring the impact on the economy, we first try to evaluate the amount of resources which are being diverted from otherwise productive endeavors, especially in information processing, which much go to the year 2000 problem, which means the productivity must be reduced. People are doing things which are no longer productive and really it's sort of maintenance, and so that you get output in a sense but it's not increased productivity. It is un-increased real standards of living. In that sense, we can measure the degree of these several hundred billion dollars which are involved in trying to bring the year 2000 problem -- to resolve the year 2000 problem. GREENSPAN: The difficulty is that we don't know what part of that several hundred billion dollars would have been spent anyway. A lot of it is on new equipment merely because the simplest way to resolve a problem which seems to be unsolvable with respect to programs is just rip out the whole business and stick in something new. And so, it's hard to know which part of this is real lost effort. A good part of it is. How much we don't know. So, there is automatically before we reach the year 2000, an economic loss in the sense of the diversion of resources to non-productive endeavors. We do not know or cannot really realistically make an evaluation of what the economic impact is as a consequence of the breakdowns that may occur. We do not know the size. We do not know the contagion and interaction within the system, and we do not know how rapidly we can resolve the problem. For example, one of the things that we at the Federal Reserve are very acutely aware of is there is a two-pronged issue here. One, try to prevent the problem for happening. And two, what do you do when it happens? I mean, for example, we had a very major bank in the City of New York a number of years ago, computer went out and the New York Federal Reserve Bank had to lend them over $20 billion overnight. Now, if we weren't there, I can tell you that the system would have been in very serious difficulty. So, part of what we are trying to do is figure out what we can do to assuage whatever problems might arise, and that it's a difficult exercise because there is such a huge element of uncertainty in the nature of the problem itself. But we are trying to come to grips with the best we can. <snip>