Y2K to cost Federal Reserve $100M, slow economic growth
- By Nicole Lewis
- Apr 27, 1998
The Federal Reserve will spend about $100 million to fix its computer systems for the Year 2000, a Federal Reserve official told Congress today.
Edward Kelley, a member of the Board of Governors of the Federal Reserve System, told the Senate Committee on Commerce, Science and Transportation that the Federal Reserve, like many federal agencies, is having difficulty with the private organizations that are linked by computer directly to its operations. In the Federal Reserve's case, its "data partners" are banks and other financial institutions.
"We do not have very much information at all about exactly what they are doing [to solve their Year 2000 problem] or what state of preparation they are in," he said. "They have been very tight with providing information, and we would like very much to have more technical information."
Kelley also told the committee that the Federal Reserve estimates the Year 2000 problem could slow U.S. economic growth by as much as one-tenth of 1 percent during the next two years.
The net effect of fixing computers so that they can properly process dates after 1999 might "shave a tenth or two [of a percent] a year off the growth of our nation's labor productivity, and a more substantial effect is possible if some of the larger estimates of [Year 2000] costs are used in these calculations."
Kelley said, "The effects on real gross domestic product are likely to be somewhat smaller than this but could still total a tenth of a percentage point or so a year over the next two years."
Addressing another area of the economy, Robert Mallett, deputy secretary for the Commerce Department, expressed his concern that small businesses were not aware of the adverse implications the Year 2000 problem can bring.
"What we find when we discuss this issue with small businesses around the country is that it's just not on their radar screen," he said.
Mallett said Commerce is in the process of organizing meetings nationwide with small- to medium-size businesses to discuss the issue.