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Thursday November 4, 10:51 pm Eastern Time

Banks draw from special Y2K discount window-Fed

NEW YORK, Nov 4 (Reuters) - The Federal Reserve Bank of New York said on Thursday banks had made the first significant borrowings this week from the discount window using special terms set up to handle year-end liquidity needs.

The Fed said banks borrowed $210 million on Wednesday at the discount window under the special facility which allows for expanded collateral.

Fed officials said it was the first time they had seen ``significant borrowings'' under the facility which was created to address any year-end liquidity problems related to concerns over the Y2K computer bug.

Discount window borrowings under the special facility up until now had been minimal, the Fed said.

The New York Fed, the U.S. central bank's arm in financial markets, announced in September it will accept a broader array of collateral at its discount window.

The bulk of financial markets' daily operations is usually easily financed by borrowing against top-grade collateral -- mostly U.S. Treasuries.

Now a broader array of debt instruments may be used as collateral in discount window borrowings. Fears of Y2K computer glitches may make liquidity harder to get or more expensive than usual in the computer-driven banking system.

Most major banks and financial institutions have said they have fixed their computer software to eliminate the Y2K glitch, which could prompt some computers to erroneously read the new year as 1900 instead of 2000. The potential glitch stems from programming shortcuts taken on earlier computers with less memory than today's models, when programs included only the final two digits of a year to save memory space.

-- Homer Beanfang (Bats@inbellfry.com), November 05, 1999

Answers

Possibly the single most important post of the day!

-- Mad Monk (madmonk@hawaiian.net), November 05, 1999.

Expect this to increase.

Watch the corporate-treasury interest spread.

This could be the last flight to quality.

-- nothere nothere (notherethere@hotmail.com), November 05, 1999.

What would be VERY significant if this drawing was to obtain currency (cash) and not just a borrowing credit.

-- Sure M. Worried (SureMWorried@bout.Y2K.coming), November 05, 1999.

Hey MadMonk,

I was glad to hear about the dockworkers' strike not happening.

At least now you won't have to Re-Prep.

Hang loose!

-- nothere nothere (notherethere@hotmail.com), November 05, 1999.

Got cash?

Damn, it's only November. This is early for the stampede to start. Wait til that stupid movie comes on. Joe and Mary Public are gonna shit a brick.

-- Gordon (g_gecko_69@hotmail.com), November 05, 1999.

nothere nothere,

Watch the corporate-treasury interest spread.

This could be the last flight to quality.

Keep your eye on the TED spread also.

check 6

S.O.B.

-- sweetolebob (buffgun@hotmail.com), November 05, 1999.

>>>Now a broader array of debt instruments may be used as collateral in discount window borrowings.

So this means, what? To get this extra currency, banks don't have to have additional cash on reserve, just debt. Doesn't this drive down the banks' reserve ratio, making them even MORE vulnerable to a run?

-- scarecrow (somewhere@over.rainbow), November 05, 1999.

Let's see... Hmmmmm... I probably get one, er, maybe two bi-weekly paychecks before the balloon goes up... Shoot! Time sure flies whether you're havin' fun or not!

JJ

-- Jeremiah Jetson (laterthan@uthink.y2k), November 05, 1999.

http://www2.startribune.com/stOnLine/cgi-bin/article?thisStory=8105784 5

To be published Sunday, November 7, 1999

Year 2000 computer changes shouldn't harm flow of cash

Jim Buchta / Star Tribune

Wondering how Y2K is going to affect your ability to withdraw cash from the bank or an ATM? Are you concerned it's going to wipe out all of your financial records?

Worry not, says Kevin Murphy, assistant commissioner for financial exams at the Department of Commerce. In Minnesota, 99.7 percent of all banks and credit unions have met federal and state Y2K compliance standards, he said.

"To the best of our knowledge, they are ready and they will be ready," Murphy said. "It doesn't mean there won't be some minor problems."

Murphy and other banking officials agree that Y2K-related problems shouldn't cause big problems at banks or ATM machines.

Banking and financial service companies have been working on Y2K issues for several years, according to the Minnesota Bankers Association.

Most big banks, such as Norwest, TCF and U.S. Bank, have installed Y2K-compliant software and have tested their equipment. ATM machines are operated by businesses regulated by the Department of Commerce.

If you do encounter a broken ATM, don't assume that it's down because of a Y2K problem -- problems with ATMs aren't all that unusual, Murphy said.

Some banks and other financial institutions are in buildings that already have emergency generators so if there is a Y2K-related power failure, it's unlikely that your records will be wiped out, said a Norwest spokesman.

Do your homework to avoid major hassles. Murphy suggests checking your personal insurance policies to see if they cover Y2K-related losses, such as damage caused by a Y2K computer or product failure or damage to your house if the power fails.

Because the Federal Deposit Insurance Corp. insures deposit accounts up to $100,000, Murphy doesn't recommend liquidating your assets and stuffing your mattress full of cash. Instead, withdraw only what you'd spend during a long weekend.

One reason not to load up on cash: You're more likely to fall victim to a thief than to a Y2K problem, he said.

Status

Banks are Y2K-compliant; cash should be available and ATMs should work.

Tips

Check your bank's Web site to see if there is a Y2K readiness Web site. For example, American Express Financial Advisors has a Web site, americanexpress.com

/advisors/year2000/, that includes information about Y2K issues.

Talk with your banker or lender to assess the company's Y2K readiness and see if there's a phone number you can call to verify bank balances.

Make a list of all financial accounts, including retirement accounts, securities, insurance policies, bank statements, credit card accounts, mortgages.

Keep important documents such as contracts, birth certificates, passports and tax records in waterproof, fireproof containers.

Save copies of all financial correspondence for the last several months of the year and keep them organized and accessible.

Maintain accurate checkbook and savings account balances so that you'll have something to compare to next year's balances.

Don't withdraw huge sums of money from the bank. If you're concerned about not having enough money, consider buying traveler's checks. They can be spent as cash, and can be replaced if they're lost or stolen.

Don't panic and don't liquidate your assets and bank accounts.

Beware of con artists. If someone asks you for account information, do not give it to them unless you can verify that the request is legitimate. Do not make cash withdrawals or bank transfers to those offering to transfer the money to Y2K-safe accounts. Also, beware of those selling Y2K-safe investment products.

If you bank online, make sure that your computer is Y2K compliant. Keep back-up disks and printouts of your transactions.

-- Sources: Minnesota Department of Commerce, American Express Financial Advisors, Minnesota Bankers Association, Norwest Banks.

-- Homer Beanfang (Bats@inbellfry.com), November 05, 1999.

Interesting.

Which banks?

-- Mitchell Barnes (spanda@inreach.com), November 05, 1999.