Feeds

Brit firm shows US Senators ‘the real turd in the Y2K punchbowl’

Ask not for whom the bowl flushes....

  • alert
  • submit to reddit

The Essential Guide to IT Transformation

An analyst with London Y2K consultants International Monitoring lashed out at numerous US government agencies for soft-pedalling international Y2K threats during a Senate Y2K Committee hearing last week. Chief among these is the Clinton Administration's special Y2K working group, whose recent, soothing report IM analyst Nick Gogerty denounced as "potentially reckless". At worst, he predicted, this sort of Pollyanna pandering could lead the administration to lose its credibility during the looming crisis, and with that its ability to lead the populace to sanity once the madness begins. Committee Chairman Robert Bennett, a Republican from Utah, might have delighted in pointing out that the Clinton Administration has hardly any credibility left to lose, but graciously held his tongue. The US State Department also drew fire for suppressing the awful truth about international travel at rollover time. The Department has issued a general travel advisory; but it won't name the names, Gogerty speculated, because it wishes to maintain "near-term objectives", which he declined to elaborate. What might these be? Deterring cyber-attackers from exploiting the world's weakest transportation systems under Y2K cover? Fear that finger-pointing abroad might lead to retaliatory accusations and subsequent lean times for the American tourist industry? Reluctance to ridicule the Chinese and South Koreans, who can scarcely keep their planes in the air under the best of circumstances? (Come on, is anyone really going to fly CAAC or KAL on 1 January?) Transportation, energy, insurance, emergency services: all these industries have far more potential to suffer from Y2K mischief than we suspect, Gogerty believes. But it is in the international banking system where he sees the greatest threat to the continued survival of the human race. Here a loss of confidence can lead to widespread panic, and panic can lead to economic catastrophe. International Monitoring prepared a detailed report on the banking issues, but, as Gogerty said, it would not be prudent "to publicly discuss the detailed risks...in a public forum such as the one before us today." He submitted the report as prepared testimony. The Register despaired of ever seeing it. But the Senate Committee apparently disagreed with Gogarty's estimate of its potential to scatter the herd, and promptly posted it on its Web site. It was a difficult read, but we persisted. The report boldly asserts that "Herstatt risk could be the real turd in the Y2K punchbowl." And, no, we haven't got a clue what "Herstatt risk" means either, but we do love a good metaphor. The best we could make of it is that Herstatt is a German banker who gained fame by inadvertently rendering his bank insolvent. We think it could be called "Leeson risk" as well. If we read it right, the greatest of all risks faced by an institutional bank are eagerly provided by the human beings it employs, all of whom, according to Gogerty's reckoning, are imbeciles. The banking system functions only because computerised accounting provides a safety infrastructure which catches errors and prevents the imbeciles from doing what God created them to do: accidentally bringing the entire world economy to grief. It might work like this: enormous banking "clearinghouses" handle, on a daily basis, credits and liabilities in the range of tens of billions of dollars. A single human error -- say, something trivial like a misplaced decimal point -- is allowed to pass the computerised accounting infrastructure by an obscure Y2K stuff-up. This causes some gigantic and time-sensitive payment upon which a hapless clearinghouse depends to be missed. The clearinghouse then defaults on payments it owes to others because it can't collect the income it's owed. A domino effect develops, and total world anarchy ensues. Alternatively, the clearinghouse might make its payments in spite of being unable to collect, simply by borrowing hundreds of billions of dollars. Paying interest on that, even for a matter of days, might wipe out a month's profits. If the problem were to appear in several markets at once, the dreaded domino effect might yet be triggered, and blood flow in the streets. "We believe Y2K will be the second costliest accident in history," Gogerty claimed. (Assuming WWI was the first, then Herstatt really is the Mother of all turds.) But, "barring nuclear or major chemical failures, loss of life should be minimal in the USA," he chirped. He had perhaps meant to reassure the Committee, but one could have heard a pin drop when he finished his speech. It was all over their faces: "what the Hell is 'minimal' supposed to mean? And worse, what might 'maximum' mean, and which poor tribe is going to represent that extreme?" It was several minutes before Co-chair Christopher Dodd (D--Conn) summoned the courage to ask. "There is a constant rate of loss of life due to industrial accidents in the this country every day," Gogerty explained. "The Y2K bug and, let's say, the 'non-standard behaviour' of individuals around that [time] will...lead to a spike in accident rates." "All right, we'll leave it there," Dodd replied with a nervous smile. He didn't seem to appreciate that, from Gogerty's point of view, he'd just been given the good news. ® Related Stories US Senate Y2K Committee underwhelmed by preparations Johnny Foreigner Y2K laggards named and shamed Y2K bug eats London's electricity The man who ate the Y2K bug BA tells Y2K bug to take flying jump Y2K bug sinks Third World trade

Boost IT visibility and business value

More from The Register

next story
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Sonos AXES support for Apple's iOS4 and 5
Want to use your iThing? You can't - it's too old
Amazon says Hachette should lower ebook prices, pay authors more
Oh yeah ... and a 30% cut for Amazon to seal the deal
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
Too many IT conferences to cover? MICROSOFT to the RESCUE!
Yet more word of cuts emerges from Redmond
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
Chips are down at Broadcom: Thousands of workers laid off
Cellphone baseband device biz shuttered
Feel free to BONK on the TUBE, says Transport for London
Plus: Almost NOBODY uses pay-by-bonk on buses - Visa
Twitch rich as Google flicks $1bn hitch switch, claims snitch
Gameplay streaming biz and search king refuse to deny fresh gobble rumors
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Backing up Big Data
Solving backup challenges and “protect everything from everywhere,” as we move into the era of big data management and the adoption of BYOD.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.