WASHINGTON - A glass-walled room atop the Federal Reserve complex will offer one of the best views in Washington when fireworks burst in the sky at midnight on Dec. 31. Inside, though, 100 Fed employees will fix their eyes on computer screens, watching for any sign of pyrotechnics in the U.S. financial system.
Fed officials insist that tests show there will be no special problem in the banking system once the calendar turns to 2000, when older computers that symbolize years with just two digits are vulnerable to crashes. Nevertheless, the Fed Tuesday cited "market uncertainties associated with the century date change" as the major reason it didn't raise U.S. interest rates that day for a fourth time since June.
Regulators from the Fed and the other banking agencies have made at least two on-site inspections of all 10,200 federally insured banks, and every bank is now deemed Y2K-ready. Still they will stand guard over the New Year's transition in case the so-called millennium bug delivers an unexpected bite.
"We're going to be on full alert, just to be sure," said Fed Governor Edward Kelley, the central bank's point man on Y2K preparations. "We do not expect any particular problems."
The Fed's war room will operate 24 hours a day from early Dec. 31 for as long as two weeks into January. The agency will supply its overnight staff with food and nonalcoholic beverages.
Mr. Kelley plans to be on duty, serving as master of ceremonies on New Year's Eve.
The Fed Y2K team's perch, ordinarily a meeting and dining room, has been outfitted with rows of work stations. Operations employees, monitoring the performance of the Fed payment system, and bank supervisors, watching for signs of distress from the Fed's 12 regional banks, occupy the room's south end - with the best view of the festivities planned outside. Public relations employees, arrayed in a central column by the west windows, are to watch news reports and answer calls from journalists. Computer technicians, stationed to the north, are to mind the Fed's internal computer networks.
Three big-screen television sets stand among the banks of desks, and a master clock displays Eastern Standard Time in large digits.
Along the windowless east wall is Mr. Kelley's command center.
Inside a glass-enclosed dais, a conference table holds computers and phones, plus a speakerphone in the middle. Four smaller TVs set into the wall give an eye on the rest of the world.
Officials on the dais can address the rest of the room on a nearby microphone, and post updates on a message board.
Officials will know if problems emerge elsewhere in the world long before midnight strikes in the United States. Above the TVs on the command center's wall, eight clocks show the time in cities around the world, starting on the right with Wellington, New Zealand, which begins its new year 18 hours before Washington.
Moving left, as if going from east to west, the clocks display a city name and the number of hours ahead of or behind Washington: Tokyo 14 hours ahead, Moscow eight ahead, London five ahead, and San Francisco three behind.
The setup in the war room is all business. The lofty views are obscured by scrim curtains, and the balcony outside is empty of furniture.
The furniture inside is an ad hoc arrangement for a one-time event. The dais is temporary, and the chairs are rented. The desks and computers are surplus stock pulled out of storage, and the carpet is new stock that will be reinstalled elsewhere at the Fed.
Fed employees have gone through several dry runs of their New Year's plans, setting up mock conference calls with the regional Fed banks and the federal government's central Y2K office.
The Fed has set up a separate, temporary lending program for banks in case they need extra financing to get through the Y2K transition. The effort is just beginning to see significant activity; banks had borrowed a total of $236 million under the program through Dec. 15, up from $11 million as of Dec. 8, according to the latest weekly report on Fed Reserve balances.
Banks also have been given access to extra currency, in case fearful customers hoard cash.
The broadest measure of the U.S. money supply, M3, which includes cash and checking and money market accounts, as well as certificates of deposit, rose 17% in November. This pile of cash, carried as a liability on banks' balance sheets, is making it difficult for banks to balance their books. Banking officials say the Fed has informally eased enforcement of capital ratio requirements as the Y2K-driven increase in demand for cash by companies and individuals has pushed up the money supply.
A report from Chicago-based employment firm Challenger, Gray & Christmas Inc. said cash withdrawals that average $1,000 per household could spark a mini-boom in retail sales in January if people don't need the cash for Y2K emergencies.
On the New Year's weekend, Fed employees will watch to see whether networks for automated teller machines or electronic funds transfers run into bumps, forcing systems administrators to reroute the financial traffic that flows at all hours.
The Fed and the other banking agencies - the Federal Deposit Insurance Corp. along with the Treasury Department's Office of the Comptroller of the Currency and Office of Thrift Supervision - also are standing by to help banks or thrifts carry out contingency plans if the power goes off or if computers hit snags. Some banks plan to be open for business Jan. 1 and will be processing transactions overnight. Mr. Rega is with Bloomberg News.