Thrift Group Seeks Lower Rate On Lending to Ease Y2K Crunch

A Federal Reserve Board plan to help banks withstand a year-2000-related cash crunch is good, but needs tweaking, a thrift trade group said.

America's Community Bankers said the proposed "special liquidity facility" would provide financial institutions with a dependable and flexible source of credit.

But the group suggested reducing the rate at which the money would be lent from 1.5% to 0.75% above the Federal Open Market Committee's targeted federal funds rate. The lower spread is high enough to discourage borrowing except in "true emergencies," the ACB said.

The thrift group also criticized the Fed's proposed Nov. 1 start date. Some institutions may want to build up their cash inventory gradually, the ACB said, perhaps starting as early as Sept. 1.

"There is no guarantee that some event or media account may not trigger a Y2K cash outflow emergency before Nov. 1," the ACB said.