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Current Events - 01/10/2000

Yawn2K — Well the first four digit year to start with a “2” has arrived (see how I deftly avoid any critical comments on whether this year or next year starts the new millennium).  And it advent of the year 2000 has been a monumental nonevent.  CONGRATULATIONS!  I even had a TV reporter ask me if I thought the Y2K scare was one of the biggest hoaxes ever.  I assured her that was not the case and that the banks were absolutely delighted that “nothing happened”.  There could be no better result.  Talking with the Federal Reserve on New Year’s Eve I got a first hand report that the Y2K conversion had gone smoothly in Guam (across the International dateline and 21 hours ahead of us) and the people in the command central were trying to figure out how to get a TV in to watch the bowl games because the slow march of the new year around the globe was going to prove very boring.  The minor problems that did occur were largely human errors rather than Y2K glitches.  For example, one bank reported that in the course of its Y2K compliance efforts years were scheduled to be listed as four digits rather than two effective January 1, 2000.  However, the year 1999 was mistakenly corrected to 9999.  This caused an understandable heart flutter until the source of the error was spotted and easily corrected.  I hope you did not have to experience such a hiccup.

ATM News — It wouldn’t be a Current Events column without some word about our ATM litigation.  As you know, the cities have appealed the Preliminary Injunction ruling that was handed down in our favor.  The briefing schedule for all of this has yet to be finally determined, but the injunction we won remains in place until lifted by a court order.  Another development has occurred which is worth noting, however.  California Federal filed a motion to intervene in the lawsuit.  We have not opposed this motion, but the cities have.  In doing so, San Francisco made a very important admission in the first sentence of their opposition:

“San Francisco now stipulates that its ATM Ordinance is not severable as to national banks.  Thus, if Bank of America and Wells Fargo Bank ultimately prevail on their theory that the national bank Act preempts the Ordinance, then the Ordinance shall be invalid with respect to all banks...”

We could not agree more.  This is terrific news and I think we were instrumental in having it happen.  The only thing that surprised me at the original hearing on our preliminary injunction was the argument from the San Francisco City Attorney that if the national banks were pre-empted, the ordinance could be reformed to apply to other financial institutions.  This ordinance was sold to the public, in part,  as a way to curb the alleged anti-competitive practices of national banks.  The argument, however, would have it apply solely to the institutions it was designed to protect!  I thought this was an outrageous suggestion and so did the judge.  We made a point of letting the media know of the folly of this position.  I am sure the political ramifications were not lost on those in City Hall.

Savings Bonds — The Treasury is once again actively promoting the sale and retention of Savings Bonds in California and across the country.  Their efforts this year are enhanced by the development of on-line Savings Bond sales and the performance of the new inflation indexed I Bond.  At 6.98%, the I Bond was outperforming even long term Treasury Bonds the last time I checked.  Included in this Monday Courier packet is a brochure with more information on Bond sales and ways to link Internet sales through your home banking services, should you desire.  Have your operations folks give it a read.

Privacy — Despite America’s rush to e-commerce and online transactions, we still want our privacy.  The challenge is to find where the limits should be.  And it’s getting harder to do.  As William Safire noted in the New York Times recently: “We are dealing here with a political sleeper issue.  People are getting wise to being secretly examined and manipulated and it rubs them the wrong way.”  In 1999 the federal “Know Your Customer” proposal requiring banks to collect information about their customers drew more than 300,000 negative comment letters from the public.

The issue requires a careful balancing to both protect customer privacy while allowing financial institutions and others to pass on the benefits of information technology, such as lower costs and increased convenience.  Some legislative proposals that we have seen would block such conveniences as combined monthly statements, offering discounts on additional products, and servicing loans efficiently.  Even our ability to fight fraud would be compromised.  The industry has the opportunity to demonstrate leadership on this issue and it is important that we do so.  Privacy is the cornerstone of banking and the heart of our relationships with customers.

The Federal Government Relations Committee has asked me to include the attached ABA document, Elements of a Privacy Policy, for your review.  Every bank needs a clearly written privacy policy and this document can help you to develop one to meet your needs and those of your customers.  Now is a perfect time to review your own privacy policy to help keep the hard earned trust your customers place in you.

And Finally — Happy New Year from the staff at CBA and CBIS.  We look forward to seeing many of you at the Bank Presidents Seminar this coming week in Santa Barbara.  Buttonhole any of us and let us know how you are doing and what concerns are on your mind.