An unexpected benefit from the Y2K IT scare

In the run-up to 2000, huge amounts of time and money went into upgrading IT systems in order to avoid the ‘millennium bug’ (Y2K) – a fear that a use of two year dates (e.g. recording 1983 as 83) would cause problems when 1999 became 2000, with computers seeing 99 change to 00 and thinking we were back in 1900 or being┬áso confused as not to know what year it was at all any more.

The absence of actual problems when the time came is either an indication of how well the whole issue was handled or a demonstration of how much fears were exaggerated. The debate as to which of the two is true (or at least truer, for the truth can be a mix of the two) continues in a low-key way, which is why the story about how millennium bug preparations helped the US financial system survive 9-11 caught my eye:

The Joint Y2K Committee [Federal Reserve Vice Chairman] Ferguson had so recently headed proved to be a windfall of emergency planning and the entire Fed system referred back to those decisions and the associated training throughout the 9-11 crisis…

During the Ferguson-led Y2K emergency planning it was determined that key employees should carry two cell phones from two different providers and pre-load them with a master list of phone numbers including their key co-workers, key bank customers, banking regulators, utility service providers and the like. In many cases they had multiple numbers for specific contacts at each organization. It was this kind of planning which proved invaluable at all the Fed Banks across the country [on 11 September]…

Fed Banks across the country had staff working until midnight [on 11 September] to help banks make assessments [of their financial positions] and close their day. Interestingly, during Y2K planning the Fed had arranged with depository institutions to set aside some pre-pledged collateral and it was against these emergency funds that most banks drew thus saving the time and the regulatory checking usually necessary.

These extracts are from a fascinating wider account about how the Fed and the US financial system more generally coped with 9-11, The Astonishing Story of the Federal Reserve on 9-11.

It is well worth a read.

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