Fed printing billions of dollars anticipating Y2K bank run on cash

Fed printing billions of dollars anticipating Y2K bank run on cash

SAN ANTONIO, Texas (May 1, 1999 7:15 p.m. EDT http://www.nandotimes.com) - The U.S. Federal Reserve is distributing billions of new dollars to cover a possible run on the banks due to fears of a Y2K calamity.

U.S. Sen. Phil Gramm, chairman of the Senate Banking Committee, said the money would be on hand if people wanted it, but that he was confident the U.S. banking system would be untouched by computer problems associated with the arrival of the year 2000.

"The Federal Reserve Bank is literally printing up billions of dollars to have available on the belief that people are going to pull cash out of the bank," Gramm said in a news conference.

"We could literally have Americans pull billions of dollars in cash out of the banks and store this cash in their automobile, their home, in their backyards, waiting to see what is going to happen when the date becomes Jan. 1 of the year 2000," he said.

"I want to urge people to put it out of their minds that they need to take all this money out," Gramm said. "We feel very confident about the banking system -- don't worry about the banking system."

Gramm said government officials were concerned that there will be an increase in money-related crimes if people have more cash than usual. Texas Banking Commissioner Catherine Ghiglieri said Y2K scams were already beginning to pop up.

"We had one elderly lady who took out $60,000 and buried it her backyard. The next day it had been dug up. We think it was her family that convinced her to put the money out there," she said.

While Gramm expressed confidence in the U.S. banking system, he was less certain about how the problem was being dealt with in Mexico and Central America, which are important U.S. trading partners.

"I'm not worried about us getting this right (because) we've got tremendous resources," he said. "I'm worried about developing countries, and obviously the most important developing country in the world to us is Mexico."

Dallas Federal Reserve Bank president Robert McTeer said the problem could be less pronounced in developing countries because they rely more on cash transactions than electronic.