Sen. Bob Bennett, R-Utah, worries that a small computer glitch may cause a worldwide recession in two years - and he's planning legislation to help head it off.
The problem is that many computers and programs store only the last two digits of the four-digit year. The century portion is assumed to be "19." So when the year 2000 comes, the "00" stored will incorrectly be interpreted as 1900, not 2000.That may cause computers to crash. Or worse, they will continue to operate but miscalculate interest because of wrong dates, lose stock trades, overdraw accounts by billions, not allow use of credit cards and foul up myriad other transactions.
In a hearing chaired by Bennett Tuesday, Edward E. Yardeni, chief economist for Deutsche Morgan Grenfell, even said he figures the problem has created a 40 percent chance for a worldwide recession if it isn't fixed in advance.
So Bennett, chairman of the House Banking Subcommittee on Financial Services and Technology, announced he will introduce legislation requiring all publicly owned businesses to disclose what steps they are taking to solve their year 2000 problem.
"Every potential investor has a right to know those facts, and the burden must be on the corporation to disclose them," he said.
Bennett said he also wants businesses to disclose potential lawsuit liability they face from the problem, insurance coverage they have to help cover it and backup contingency plans they have in case of computer systems failures.
Bennett also testified before the House Banking Committee about his plans Tuesday and said he hoped it would join with his Senate committee to pass a bill early next year.
He said that's necessary because experts say that if businesses don't have a plan to fix their computers in place by next September, it will already be too late because of the time needed for the testing of fixes in systems.
Bennett and several House members are also considering legislation to limit liability companies would face if they make good-faith efforts to prevent year 2000 problems but are hurt when connected computer systems of others have problems.
Bennett said he is all too familiar with how a problem with one company's computer can have a domino effect on the computers of others from an experience he had when he helped set up the old Hughes Air West airline.
"It was formed from three other airlines," he said. "They merged at midnight, and at 12:01 disaster struck because it turned out that their computer systems couldn't talk to each other."
He added, "We literally lost airplanes. . . . They had to call people in the tower at Kalispell and ask them to go out and look to see if one of our planes was in the hangar."
Eugene A. Ludwig, U.S. comptroller of the currency, told the House committee a much more minor glitch that occurred when some computers failed to recognize Feb. 29 in 1996 shows some of the problems that can result.
"The Brussels stock exchange had to shut down for the day at a cost of more than $1 million in commissions. An aluminum factory in New Zealand likewise lost a day's production. . . . The Arizona state lottery commission could not pay out winnings," he said.
"Countless smaller events did not make the headlines but still involved significant losses for the firms involved. And this was an event involving a single day for which everyone thought they were prepared," he said.