Thank you all for coming here today for the Senate Banking Committee's field hearing on the
economic implications of the year 2000 computer problem. This is the first in what I hope will
be a series of forums that we will hold in the state as we mark off the remaining 682 days
between now and the millennium.
We are privileged to have with us a panel of witnesses representing a wide variety of industries,
associations, technology experts and economists. Quite frankly, each of the groups represented
here today could merit an individual hearing in their own right; and we still need to hear from
other affected organizations such as the utility industry, the defense industry, or key
So think of today's hearing as a survey of where we are and how far we have left to go in
overcoming the obstacles posed by the millennium challenge.
I think by this point in time, the general public has become aware of the existence of the year
2000 computer problem. But many people still view this problem as an abstraction, rather than
as something that could have a direct impact on their lives.
Unfortunately, the truth is the opposite of that belief.
The millennium problem has the very real potential to reach deeply into the lives of nearly every
American. From inconveniences like stalled elevators and VCRs that won't record, to financial
dislocations, to very serious medical disruptions, this problem has the ability to affect everyone.
However, individuals are not helpless. There are some concrete things that people can do right
now to make themselves better informed and even to influence the speed with which some
companies and organizations are approaching this problem.
For example, at my request, the Securities and Exchange Commission prepared a two page list of
questions about the year 2000 problem that individual investors can and should ask the people
who manage their money. These questions are available here today and are also available from
the SEC, my office or on our web page (http:\\www.senate.gov/~dodd)
People should also be asking about year 2000 readiness at their office, their bank and even of
their doctor. The questions can be simple -- are you affected by the year 2000 and if you are,
what are you doing about it? Just don't let them tell you that they're not worried because they're
sure there will be a disc they can buy to fix it.
The fact is that there's no miracle chip that can instantly and easily save computer systems from
Ironically, the very success of our computer industry is working against us here; people have
become so used to the rapid, almost miraculous, pace of invention and change in the computer
sciences, that they assume that some computer whiz will simply figure out a way to solve this
problem with a few simple key strokes.
Society seems to have forgotten what computing was like 15 or 20 years ago, with hundreds of
programmers typing in millions of lines of code on punch cards or at terminals connected to
massive main frame computers.
It is this fundamental, labor-intensive, deeply embedded code that is at the heart of the problem.
The good news, as some people will tell you, is that the solution to the problem isn't difficult: all
you have to do is change all the lines of code that read dates as two digits -- "98" or "99" -- to
code that will read the date as four digits -- "1999" or "2000."
And it is simple; it's simple in the same sense that playing major league baseball is simple. As
the movie Bull Durham said of baseball, "It's a simple game. You throw the ball. You hit the
ball. You catch the ball." While it is obvious to everyone that playing baseball on the major
league level isn't really easy, curing the millennium bug is also not easy.
Fixing this problem is costly, labor-intensive and time consuming.
Time is the only thing that we don't have -- there are no extra innings, no deadline extensions,
no dispensation -- that will change the fact that in 645 days, every date-sensitive computer
system and computer chip is going to have to successfully process the date January 1, 2000 as the
day that follows December 31, 1999.
Now let me take a step back from this scary scenario to say that I am not -- definitely not --
predicting an economic catastrophe.
But the recent news both coming into and out of Washington is not very comforting.
On February 5th, the General Accounting Office released a scathing report about the readiness of
the Federal Aviation Administration. While we will hear more about this report in a few
moments, let me just read the very blunt summary with which the GAO opens their findings:
"FAA's progress in making its systems ready for the year 2000 has been too slow. At it's current
pace, it will not make it in time."
Other news is also troubling; one week ago, I attended a hearing on the readiness of the Federal
Deposit Insurance Corporation to meet the year 2000 challenge. This regulator of more than
6,200 state chartered banks found that 21% of their supervised banks need, at a minimum, to
improve their year 2000 preparations. And it also disclosed that over 200 banks are seriously
unaware of the year 2000 problem at all.
Now in terms of percentages, 200 out of 6,200 isn't bad -- it's only about 3%. But you have to
look beyond the percentages in this instance at the raw number itself -- it's still 200 banks.
And the agency that regulates nationally chartered banks, testified in July that as many as 15% of
its large banks and 35% of its small and medium sized banks are either too slow to address the
problem or are unaware of the problem.
Banks themselves are also preparing for failures amongst their client base; George Colony, the
CEO of Forrester Research, told a major conference in January that banks and securities firms
should prepare for severe -- often fatal -- disruptions in as many as 10% of the 1000 largest
companies worldwide, and as many as 5% of the Fortune 1000 here in the United States.
At that same conference, Phil Kozloff of Citibank's Credit Risk Committee stated that financial
firms must prepare for international consequences along the lines of the recent Asian financial
crisis. "A new round of country debt negotiations" like the large IMF and World Bank loans
we've just seen in Asia, should be expected.
But this problem is not limited to big companies or large government agencies.
The health care industry, particularly hospitals and clinics, are scrambling to assess the impact of
the year 2000 on thousands of medical devices. Again, the vast majority of these devices should
experience no problems -- but even a few problems in this area can be a life and death matter.
Martina O'Brien, who heads up the year 2000 project at a large Phoenix hospital said last
"I found that some devices we own -- devices that aren't terribly old -- will simply cease to
function if something isn't done. I was expecting that maybe they'd just mess up the date, which
could be a big enough headache, but some will shut down."
And, of course, the Federal Government is also woefully behind the curve in fixing this problem.
In fact, the most recent assessment found that only 10% of the code that needs to be re-written
has been fixed; the slowest agency to address the issue is, you guessed it, the Internal Revenue
So where does this leave us? Is it time to buy a portable generator, hide all our money in a
mattress and barricade ourselves in our house for New Year's 1999? No.
First and foremost, awareness is growing rapidly, and today we will hear from people who
represent organizations that are stepping up to meet the challenge.
Second, in addition to government pressure, market pressures will be brought to bear, including
the pressure of the individual consumer or investor. Moreover, the U.S. is well ahead of almost
any other nation in dealing with this problem. I would expect that disruptions here will be far
less severe than in Europe or Asia.
In the end, I believe that most companies and organizations and agencies will make it through the
But that leaves us with one final question: what is the total cumulative effect of small
percentages of companies and organizations in every sector of the economy failing to meet the
What does it mean for the economy, if for example, there are failures at 3% of the banks, and 2%
of the utilities, and 4% of the hospitals, and 5% of the factories.
While each instance, in and of itself, is something that the economy can weather without much
strain, the aggregate impact of many discrete problems could be our biggest cause for concern.
This is a theme that I hope our panelists will address from their unique perspectives, and I am
now pleased to turn to our first witness.
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