ATLANTA (AP) - The president of the Federal Reserve Bank of Atlanta said Monday he does not foresee any inflationary effects from the $200 billion in extra cash the Fed has on hand in case of problems caused by the Y2K computer glitch.
Atlanta Fed President and CEO Jack Guynn said few banks or businesses have drawn on the extra funds and regulators don't expect a massive run on cash as the new year approaches.
Theoretically, a large influx of cash into circulation could lead to more spending - stimulating economic growth and perhaps nudging inflation higher.
"We've never been through a Y2K kind of a period before, but we don't think that's a very likely thing we'll have to deal with," Guynn said.
Guynn made his remarks at a news conference called to announce that all 10,200 banks insured nationally by the Federal Deposit Insurance Corp. are ready for the changeover Dec. 31.
The Y2K bug may cause computers to break down at midnight Dec. 31 if they recognize only the last two digits of a year and think the date is Jan. 1, 1900, instead of Jan. 1, 2000.
Last year, the central bank ordered an additional $50 billion in new currency to be put into circulation in the event people make a run on banks and automated teller machines this month.
The Federal Reserve also has $200 billion in currency stored in government vaults, up from the $150 billion normally held in reserve. That is in addition to the $460 billion in notes circulating in the United States and abroad.
FDIC Chairman Donna Tanoue, citing a Gallup poll commissioned by federal regulators, said consumer confidence in the banking industry's readiness for Y2K has risen to 90 percent.
That means the clamor for cash hasn't materialized, a possible sign that the anti-alarmist messages federal regulators have been giving for the last month are sinking in.
"We all thought the critical period would start about Thanksgiving, and we are gratified that demand hasn't been more than normal around the holidays," said Ellen Seidman, director of the Fed's Office of Thrift Supervision. "We're still telling people don't take out more than you normally would over a long holiday weekend."
Guynn said federal banking officials are still prepared to help out institutions in "a liquidity crunch" and the Fed has created a special lending system for banks in trouble.
Seidman said consumers should keep paper records during December and after Jan. 1 - including ATM slips with balance information - as backups in case of computer glitches.
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Ray
-- Ray (ray@totacc.com), December 13, 1999