-Caveat Lector-
"Firearms are second only to the Constitution in importance;
they are the people's liberty's teeth."
-- George Washington
FRIDAY
OCTOBER 22
1999
PANIC IN THE YEAR ZERO
Social Security, banking
systems not Y2K ready
Congressional testimony sheds doubts
on fiscal preparedness for year 2000
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By David M. Bresnahan
� 1999 WorldNetDaily.com
Thousands of repairs are still needed in order to get Social Security checks
out on time in the new year, according to recent congressional testimony.
Despite ten years of preparations, the Social Security Administration is
still not ready to deal with the Y2K computer glitch.
The banking system is also not ready, while the major Fortune 1000 companies
still face major Y2K-related disruptions, according to recent reports.
"The Social Security system is now 100 percent compliant with our standards
and safeguards for the year 2000," said President Bill Clinton last
December. Recent testimony would indicate that the American public has been
deceived.
After the president's declaration there was a great deal of bragging about
the agency. They were held up as a great example of what a government agency
can accomplish. The SSA began work on the Y2K computer problem in 1989, long
before other government agencies.
President Clinton assured older Americans that they have nothing to worry
about. Social Security checks would arrive on time after Jan. 1. The Y2K bug
would not bite the fixed income of America's elderly, he assured the public.
However, some say problems could emerge. "SSA's work is not yet complete,"
said Joel C. Willemssen when he testified recently before a committee of the
House of Representatives. "Certain tasks integral to ensuring its overall
readiness for the year 2000 must still be accomplished," he added, directly
contradicting the president's statement.
Willemssen is director of the Civil Agencies Information Systems Accounting
and Information Management Division. His warning should not be taken
lightly. His statement means parts of the system are not yet Y2K compliant,
ready, fixed, or even prepared. Yet the unprepared parts of the system are
critical to getting checks out on time, for the correct amounts and to the
right people.
One of the problems involves "data exchanges," he said. This is information
sent to and received from other agencies and organizations which are known
to be less than Y2K ready themselves.
Willemssen also expressed concern in his testimony that contingency planning
has not yet been completed. Social Security payments may not get through
because of banks that have Y2K disruptions.
"SSA plans to assist Treasury in developing alternative disbursement
processes for problematic financial institutions," said Willemssen.
As of July 23, 1999, SSA tested 92 percent of its mission critical
applications. Those tests, according to their own reports, revealed 1,565
errors that needed to be fixed. Those errors were found in 283 out of 308
mission-critical systems. Of the 1,565 errors found in those 283 systems,
only 44 percent were repaired at the time of the report.
Social Security checks are scheduled to be delivered to local post offices
on Dec. 29, 1999, to avoid potential delivery problems after Jan. 1, 2000.
Many payments are to be made by electronic deposit and will be transmitted
to banks directly before the new year begins. That may serve as a good
contingency method of delivery for the January payment, but the same
solution will not work for February and beyond if there are Y2K problems at
that time.
Banks transfer funds electronically every day, and even if an individual
bank functions well within its own walls, the ability to transfer funds back
and forth with other financial institutions may be in doubt.
The Bank for International Settlements (BIS), Basel, Switzerland, is the
central bank for all other central banks in the world. They are not as
cheery about the Y2K outlook as most local banks have been.
"Some problems will be missed," predicted a recent report from BIS, which
was sent to other banks. "New problems will be missed; new problems will be
inadvertently introduced via the remediation process; even the best test
programs may not detect all potential errors; uncertainty will remain up to
and after Jan. 1.
"In other words," the report concluded, "it is inevitable there will be Y2K
disruptions, although it's not possible to predict how serious or widespread
this disruption will be."
The report details the threat of a breakdown of the inter-bank payment
system, and clearly states there is no backup.
"Y2K is unlike any other disruption problem where identical backup sites can
be activated. But any uncorrected Y2K problem is likely to affect both
sites, so the backup would not be a contingency," warned the BIS report.
Individuals who do not engage in transferring funds from bank to bank might
be impacted greatly by the problem because businesses and the availability
of funds depend on it. Transactions all over the world could be brought to a
halt, and with it there will be a halt in business and all types of
commerce.
"The inability of a major payment and settlement system to function
smoothly, or have procedures for isolating problems, will intensify
uncertainty/concern," said the BIS report. "In the extreme case, this could
have repercussions throughout the global and domestic systems."
The BIS report advises other banks to get the home phone numbers of
regulators and government officials so they can be contacted at night or on
weekends to discuss the prudence of "closing markets and declaring an
emergency financial bank holiday."
The BIS report needs to be taken seriously. The Social Security checks are
not the only financial transaction that are in danger. The world economy is
a risk, according to some financial experts.
Financial advisor and author John Mauldin has been warning of a financial
recession in America and a depression in much of the world after the first
of the year.
The signs are all there. As the last few days of the year slip by, more and
more government agencies, commercial businesses, and infrastructure systems
will begin to issue revised statements of their Y2K readiness to protect
themselves from inevitable law suits next year.
The truth about the BIS report and the failure of the SSA to be ready for
Y2K after 10 years of preparations should be more widely reported than it
is. If the concerns expressed by Willemssen and the BIS report were made
known to the general public, Mauldin believes the public would be better
prepared to face the financial difficulties he predicts will come in the new
year.
Mauldin points to recent reports by the Security and Exchange Commission, as
well as a survey by respected researcher Howard Rubin's Rubin Systems, Inc.
The SEC and Rubin report that American businesses are not fully prepared to
deal with the Y2K computer problem in a survey of the Fortune 1000
companies.
The most significant finding of the Rubin survey is that 48 percent of the
respondents said they will have all their mission-critical systems tested
and compliant by New Year's Eve. That means a full 52 percent will not be
ready!
Mauldin says that if just 5 to 10 percent of all companies lose business we
will have a recession next year. Many of the top Fortune 1000 companies are
already becoming less optimistic about business in the new year.
In a supplement to his monthly newsletter, financial expert and advisor
Martin D. Weiss says 216 blue chip stocks are "Y2K basket cases."
As an example of trouble ahead, Weiss points to findings in required
Securities and Exchange Commission filings from the nation's top businesses.
"General Motors is risking a devastating Y2K shutdown. In its disclosures to
the SEC, the company admits it could face significant impediments to (its)
ability to carry on its normal operation," warned Weiss as one example of
trouble ahead.
The problems reported by General Motors are said to be typical of those
reported by at least 219 other major firms. Many of these same companies
paint a much rosier picture in their public statements about their Y2K
preparations.
Add to the internal Y2K problems of these companies the likelihood that
financial transactions could be disrupted and you have a lot of companies
unable to do business, and a lot of people out of work.
Mauldin is expecting layoffs sufficient to bring unemployment figures over
20 percent, and a resulting drop in the stock market of 50 percent or more.
David M. Bresnahan is an investigative journalist for WorldNetDaily.com and
the author of "Cover Up: The Art and Science of Political Deception."
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