WASHINGTON - A new doomsday scenario for the year 2000: Millions of Americans, worried ATMs will become useless on Jan. 1, take sizable amounts out of bank accounts in December 1999, creating a run on the nation's banks.
That scary picture of a consumer stampede was painted last week by Sen. Robert Bennett, RUtah, chairman of the Senate Banking subcommittee on financial services and technology.
A governor of the nation's central bank quickly assured Mr. Bennett at a Senate hearing that the banking system would be able to handle even a substantial panic.
"We will have plenty of cash available to the system" to cover a wave of withdrawals, said Federal Reserve Gov. Edward Kelley, one of six banking and securities regulators who testified about actions taken to deal with year 2000 problems.
The financial industry is especially vulnerable, and some experts are concerned that consumers could lose faith in the security of their banks and the financial markets.
Mr. Bennett said he'd been told that not a single automated teller machine in the United States was yet ready for 2000. As a result, he envisioned possible massive bank withdrawals around the holidays in December 1999 - potentially turning into "an enormous national run on the banks."
When the forerunners of today's massive computer programs were first designed, storage space was at a premium. To save memory space on the oldfashioned mainframes, code writers simply omitted the first two numbers of a date. That means 1998, for example, would read as 98, 1999 as 99, and so on. The year 2000 would be read as 00.
Since the systems are coded to assume that all years begin with 19, computers will interpret 00 to mean 1900, if changes are not made.
Mr. Bennett said that while 70 percent of the nation's financial institutions have some year 2000 plan in place, few if any have completed the work.
"This is not something that can be handled with a simple flip of a switch," he said. "Most experts recognize that with limited time and resources, the financial services industry will not be able to achieve full (readiness) by the end of the century."
Sen. Alfonse D'Amato, R-N.Y., chairman of the full Banking Committee, said the response by federal regulators so far has been "somewhat lacking, and they're going to have to step up their activity."
Consumers, for their part, should ask their banks, thrifts, brokerage firms and mutual fund companies what they are doing to get ready, the regulators testified.
"I think the consumer is entitled to know," said Arthur Levitt Jr., chairman of the Securities and Exchange Commission. "I would encourage consumer activism."
Mr. Levitt noted that Wall Street, with its complexity and heavy reliance on computers, "faces a particularly serious test in preparing itself for the year 2000." He said securities firms are making a "strong, widespread commitment of time and money" to convert their computer systems, knowing they could find themselves out of business otherwise.
"We won't tolerate laggards," Mr. Levitt said.
Comptroller of the Currency Eugene Ludwig said banks that fail to adequately prepare themselves will be publicly sanctioned by his agency.
The regulators were generally reluctant to take a position on a proposal Mr. Bennett plans to draft that would shield financial institutions from lawsuits by people who lose money as a result of year 2000 problems, if the institutions took all needed steps.
"I'm not sure it's necessary," said Norman D'Amours, chairman of the National Credit Union Administration.