This is a question that has been circulating on the csy2k board a bit this past week (not word for word, just the general gist):

How will you respond if the great majority of banks (and thrifts, and Credit Unions)come out with "readiness statements" on June 30 stating that they have completed testing of their mission critical systems, that implementation is substantially complete, and that they have completed the development of business resumption contingency plans (including cash plans). All three of these activities have the June 30, 1999 deadline, according to the FFIEC guidelines (www.ffiec.gov/y2k).

Will you dismiss these as "self reported data", or actually accept these as good news? Will you blanketly state that "Bankers specialize in lying, they can't be telling us the whole story", or will you actually accept the thought that maybe, just maybe, one industry got it right?

Just something to think about.

-- newlurker (bcobur@yahoo.com), June 28, 1999

Answers

I will say "who cares?". Ever done any big iron programming yourself?

br14

-- br14 (br14@bout.done), June 28, 1999.

Well... I guess that if they wanted me to keep my money in the bank (which it seems they do...) then they wouldn't mind me looking over their testing results... Would they?

If they want me to play their game.... then they must be willing to play mine. If they cannot show me the information that I request, then I can only assume that they don't have it.

-- (cannot-say@this.time), June 28, 1999.

I'm all for good news. In fact, I think the financial services industry is well ahead of most.

Regardless, I would take the information you outline above for what it's worth. It is "self reported data". This doesn't dismiss the data it merely puts the data in it's proper perspective.

The tone of your post indicates you have a vested interest in the nature and control of public perception. This makes me question your motive for posting here.

I have more questions for you "-- newlurker (bcobur@yahoo.com)",

Why don't you provide us with additional information regarding why you have come here to ask this?

Why do you feel it is ethical to question a forum such as this without providing information regarding who you are and what the information you gather will be used for?

Oh, and as far as your speculation that on June 30 the "great majority" of banks, thrifts, and credit unions will come out with "readiness statements" I'll wait and see if that is true. If it is then perhaps I can put more weight on the truthfulness of the information contained within.

The last part of your post raises the most concern for me though. How many banks, thrifts and credit unions make up this industry that "maybe, just maybe...got it right"? This blanket statement arrogantly underestimates the ability of errors to remain or new errors to be created as a result of y2k remediation. No industry will be "right". The interconnected nature of the problem along with the size and complexity make this 100% impossible.

Mike ===================================================

-- Michael Taylor (mtdesign3@aol.com), June 28, 1999.

Newlurker,

If a bank has massive problems will they report that?? Most bankers that have issued statements say they are more concerned about people panicking than actual technical problems. I am of the opinion that a happy face report is all that is acceptable to any banking institution. Our fractional reserve banking is based on faith. Something else to think about.

-- gary (anom@yahoo.com), June 28, 1999.

That would be good news indeed, a step in the right direction. However, I think it's still pretty widely accepted that once bad data from a not so compliant source is entered into the data, the system will no longer work with 100% correct figures and the errors will increase... if their "business resumption contingency plans" include shifting to a manual, all hard copy system I'll bet it could be as accurate as it ever was, (but I'd bet just a tad slow.) That just might be the way banking gets done for a while after roll-over.

-- Roger (pecosrog@earthlink.net), June 28, 1999.

What an interesting conundrum. Here we have an industry, a monetary system, based on "confidence", pure and simple. Why "confidence" is even necessary is a whole other issue, as no other human endeavor, apart from organized religion, requires the level of "faith" that modern banking does. So, they have a technical problem that apparently raises a threat to that "confidence". I ask you, how is self-reported data in any way confidence building? Their statements of compliance are counter-productive in this regard. In other words, "take our word for it". That might work, it's worth a shot.

How about raising reserve levels? How about increasing FDIC bank contribution levels? How about divesting foreign exposure? How about raising deposit rates to attract deposits instead of driving them away? How about independent testing and validation? How about publishing individual bank compliance progress levels? No, these measures are too sensible, too forthright, the very definition of confidence. They're all too "risky" in an industry and an economy that requires inordinate and undeserved amounts of "confidence" in order to operate.

The banks are funny. The want confidence, they need confidence, they even DEMAND confidence, yet they do everything to avoid those things that would, in fact, legitimately instill confidence in the face of unfolding events. Well, confidence cannot be demanded, it must be earned, not by subterfuge, but by deed, by action. I hope they come to see this and I wish them well in all their concrete confidence building efforts.

-- Nathan (nospam@all.com), June 28, 1999.

I would say that they speak with forked tongue.

You see, here in the state of Colo. the bank lobby got the legislature to pass an immunity law. Now you can no longer sue any bank for y2k problems as long as they acted "in good faith." Since it is impossible to prove that a bank acted recklessly (without big $$$$) then the banks are off the hook. They can say whatever about their systems and not have any worries about lawsuits, especially if they documented all their y2k budget and time logged.

I don't trust that; call me paranoid, but I don't trust it one bit.

-- Jim the Window Washer (Rational@man.com), June 28, 1999.

Why Jim, IEEE was trying to do the same thing, and everyone here was delighted with their efforts. Isn't that amazing?

In any case, this is not quite a case of 100% self-reporting. These banks have all been subjected to multiple FDIC audits, and the banking geeks say these audits have NOT been rubber stamps either. As I understand it, part of the compliance declaration must include certification of some required amount of testing with other banks and with the FDIC as well. Beyond this, many banks are known to have done interface testing with their major customers.

As for whether this all adds up to "confidence" in the system is largely psychological. Hardliner has already made it clear that he wouldn't trust the banks even if he personally audited all their code. This is a matter of policy for many, rather than evidence.

-- Flint (flintc@mindspring.com), June 28, 1999.

Flint, the question remains. Why seek immunity if everything is all good to go? If, it's just overblown hype, then why a law for banks and big business to give them special treatment? Please, tell me why.

P.S. I don't know anything about IEEE or who or what it stands for, please elaborate. Thanks.

-- Jim the Window Washer (Rational@man.com), June 28, 1999.

Jim:

Much of this has been covered in great detail in other threads. Is your email real? If so, I'll talk to you offline if you'd like. Otherwise, my address is real, so you can use it if you wish.

-- Flint (flintc@mindspring.com), June 28, 1999.

Flint, can't talk offline.

I just want to know why the push to pass liability immunity laws if the banks, by and large, have this thing licked. It makes no sense to me. Same thing for big business. My problem is that now any bank that operates in Colo. can claim anything they want without virtually any fear of lawsuit. Please, why do they do that?

-- Jim the Window Washer (Rational@man.com), June 28, 1999.

Jim:

To answer your question, I'd need to read the Colorado Record or whatever to get the banker's testimony and any transcripts of debates that were held.

In general, of course, everyone wants protection. It can never hurt. It might help. And the powerful can sometimes get it. But I admit it's hard for me to picture just what sort of protection they can get if there are serious problems with the banking system. If those problems are minor and local, then the bankers can hide the bodies, and they've got away with a fast one. Whether they have worrisome computer problems or not.

I'm not opposed to a blanket, no-fault, "let's dig ourselves out from under without wasting resources on fixing blame" approach. But selective protection for the powerful bothers me.

-- Flint (flintc@mindspring.com), June 28, 1999.

I agree, Flint, that special protection is a real problem. I even agree that the legislators both local and national should have either gone no-fault or total fault. Probably no-fault considering the current legal climate. To get the details here in Colo I'd have to do some digging, and it is not a priority. It did get quite a bit of press here in April. But, it is moves like this that make uneasiness turn into "panic" whatever that means. I remember a friend of mine who thought Y2K nuts were nuts, until April when the Banks got their immunity. Now, he's pulling his money out, doing preps, etc. Sure, most people don't watch it closely, but the banks have to understand this move does not inspire confidence.

-- Jim the Window Washer (Rational@man.com), June 28, 1999.

Here's a January article about that liability legislation in Colorado:

http://www.denverpost.com/news/green0122.htm

"Maybe we should worry"

-- Linkmeister (link@librarian.edu), June 28, 1999.

What concerns me most about U.S. banks is not their own compliance, but the compliance of organizations that banks have made loans to.

-- Linkmeister (link@librarian.edu), June 28, 1999.

Nathan said it best in summarizing the whole banking situation:

"Here we have an industry, a monetary system, based on "confidence", pure and simple. Why "confidence" is even necessary is a whole other issue, as no other human endeavor, apart from organized religion, requires the level of "faith" that modern banking does. So, they have a technical problem that apparently raises a threat to that "confidence". ... How about raising reserve levels? How about increasing FDIC bank contribution levels? How about divesting foreign exposure? ... The banks are funny. The want confidence, they need confidence, they even DEMAND confidence, yet they do everything to avoid those things that would, in fact, legitimately instill confidence in the face of unfolding events. Well, confidence cannot be demanded, it must be earned... "

Operating in a world of 2%-12% reserve requirements, 2% FDIC backing, and 2% cash backing, banks should have had "confidence" monitoring departments in place all along, looking out for any "bumps in the road" that might throw more than 2% of their depositors out of their necessary "faith offering" mode.

They should have had Y2k on their screens in 1992, hired de Jager and Yourdon and a few others, and had their remediation in full swing in 1995, and nailed it down by June 30, 1998.

But they operated like other JIT corporations, cutting personnel, automating, reducing customer relations to a minimum. As they sowed, now they may reap.

Steven Solomon's book, The Confidence Game: How Unelected Central Bankers Are Governing the Changed World Economy, is a good read about crisis points that were handled during Volcker's time (as far as I've read). The system was SO close, so many times, with one official or bank or brokerage having the power to pull the rug out -- and that was WITHOUT the public losing confidence -- it was all just bankers doing it!

But they didn't nail it down a year ago to earn public confidence, their arrogance is now showing and their habitual intimidation of the public is the last "Hail Mary" they've got, and it's up to "us" the public to decide whether to save their necks or not.

Thumbs up? Down? Well, do you feel lucky, banker? Do ya?

They've been playing as dangerously close to the edge as regulators would permit, and now the edge is being radically jerked backward, exposing them all. (Does any bank have a 20%-30%-40% reserve ratio?)

Who knows who'll get hurt more? They'll try to say it's the public -- they'll hide in their "public utility" persona. We'll have to think about just how much utility we get from them.

When they batter us with beggings about how "we" must stick together to "save 'our' system," well, you know what I always say at times like these:

What do you mean, "we", kemo sabe?

-- Tonto (kemo@not.so.sabe), June 29, 1999.