On July 30, Alan Greenspan did not show up to testify on y2k before the Sanate Banking Committee. This is too bad; I had wanted to read his testimony. He is a graduate of the Dwight D. Eisenhower School of Communications, and I really wanted to hear him deal with y2k. Instead, a little-known Board of Governors member appearee before the Committee. His written testimony is standard y2k PR flakkery: "Yes, there is a problem, but you can count on us!"
What he did say was scary enough. Here are some highlights.
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"Like our counterparts in the private sector, the Federal Reserve System still faces substantial challenges in achieving Year 2000 readiness. These challenges include managing a highly complex project involving multiple interfaces with others, ensuring the readiness of vendor components, ensuring the readiness of applications, testing, and establishing contingency plans. We are also faced with labor market pressures that call for creative measures to retain staff who are critical to the success of our Year 2000 activities.
"According to industry experts, one-quarter of an organizationís Year 2000 compliance efforts are devoted to project management. Managing preparations for the century date change is particularly resource-intensive given the number of automated systems to be addressed, systems interrelationships and interdependencies, interfaces with external data sources and customers, and testing requirements. In addition, Year 2000 preparations must address computerized environmental systems such as power, heating and cooling, voice communications, elevators, and vaults. In the case of the Federal Reserve, management of this project is particularly challenging in that it requires coordination among Reserve Banks, the Board of Governors, government agencies, numerous vendors and service providers, and approximately 13,000 customers" (p. 2).
Got that? 13,000 customers. This means banks. And each has to deal with a vendor. This coordination project is beyond anything that the Fed, or any organization, has ever had to solve.
The survival of the modern economy -- and maybe the entire civilization -- depends on this bureaucracy's ability to solve the problem.
Where is the Fed in the y2k repair process? It has finished the inventory process. "We have completed an initial inventory of vendor components used in our mainframe and distributed computing environments, and vendor coordination and system change are progressing well" (p. 2). Progressing well? According to the California White Paper ("Government" category), the inventory process accounts for 1% of the overall project.
He promises that the Fed will complete a survey of all the preparedness of all 13,000 banks in mid-1998 (p. 1). This will leave 18 months for testing (p. 1). This assumes, of course, that all of the 13,000 banks are ready for testing.
What are the threatened sanctions for noncompliance? None is mentioned here.
The Fed has conducted a survey. Out of 13,000 surpervised banks, 1,000 actually replied to the Fed's questionaire earlier this year (pp. 3-4). This means that 12,000 didn't bother. Why bother? There are no sanctions.
He assures us that "the banking industry's awareness level has improved substantially during 1997" (p. 4). Given the nonexistent level of awareness as recently as mid-1995, this is good. Awareness is dandy; but what is needed is a cure. The awareness of the pilot and his copilot that their 747's hydraulic system has just failed is important; the problem is, without the hydraulic system, they can't land the plane. I ask: Will they admit this to the passengers?
But rest assured, the problem is well in hand. Here's why:
"We have inaugurated a Year 2000 newsletter and have just published our first bulletin addressing specific technical issues. Copies of our recent newsletter and the bulletin are provided as Attachments 1 and 2, respectively. We have also established an Internet Web site to provide depository institutions with information regarding the Federal Reserve Systemís CDC project. This site can be accessed at the following Internet address: http://www.frbsf.org/fiservices/cdc."
With an official newsletter and a Web site, there's no need to become alarmed.
They've even produced a 10-minute y2k awareness video for bank officers (p. 5).
Why are you worrying, you big silly?