Alan Greenspan testified before the Senate Banking Committee that y2k constitutes a major threat to the economy, and to banks especially. He promised that the Federal Reserve will pump billions into banks that become insolvent because of y2k.
My question: How?
Don't worry, says another economist. "David Wyss, chief economist of consultants Standard & Poor's DRI, says the computer bug could reduce economic growth by 0.3 percentage point in 1999 and 0.5 point in 2000. That's a loss of $65 billion. But it won't trigger a recession."
I feel better already.
This was published in USA TODAY (Feb. 26).
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WASHINGTON - Federal Reserve Chairman Alan Greenspan said Wednesday that the year 2000 computer bug is already hurting the economy and warned of bigger damage ahead.
"Inevitable difficulties are going to emerge," he said. "You could end up with . . . a very large problem."
He said the Fed was ready to lend banks tens of billions of dollars if the bug causes their computers to break down in the year 2000 and they can't make payments. . . .
"Before we reach the year 2000 there is economic loss," the central bank chief told the Senate Banking Committee.
Even if most firms fix the bug, it will only take a small number to trigger big problems, he added.
Greenspan also voiced worries about Europe, where technicians have been focused on retooling computers for the 1999 introduction of a new currency, and not on Y2K.
"The Y2K problem is a very serious threat to the U.S. economy," says Edward Yardeni, chief economist of Wall Street broker Deutsche Morgan Grenfell.