Brinks/19″/mike1st/mark2nd

By JENNIFER NETHERBY

Staff Reporter

A pool of cash is beginning to grow in Los Angeles as the Federal Reserve Bank, financial institutions and a broad spectrum of other businesses around town brace for possible year-end hoarding.

Concerns about extraordinarily strong demand for cash over the next few months is coming from two factors.

The first is that Angelenos might start pulling out unusually large sums of cash to celebrate the end of the millennium.

The second, and more substantial, is that many local consumers and businesses might withdraw portions of their accounts due to lingering concerns about Y2K-related computer breakdowns.

“The worst fear is that the lines (at the bank) will feed on themselves and become big lines with massive (cash) runs on banks,” said John Stafford, spokesman for the California Bankers Association. “It’s a public consumer confidence issue. There are simply some people that will withdraw money.”

The Federal Reserve has begun printing and distributing to its U.S. branches an extra $50 billion in currency, a substantial increase over the $150 billion now in reserve. The extra cash will be in Reserve banks by Oct. 1.

Fed officials in downtown Los Angeles, where the Fed maintains its primary cash vault, declined to reveal how much its cash reserves will rise between now and year end.

Fed officials believe L.A.-area banks and financial institutions will begin building up their cash reserves over the next month, and that they’ll continue stockpiling through December.

Officials at the Fed and various businesses downplayed the possibility of a large-scale cash run.

“We don’t believe (the Fed’s cash buildup) is actually needed,” insisted Roger Replogle, director of cash services at the Los Angeles Federal Reserve branch. “We’re printing it as a contingency to make sure the currency is available to the public.”

Aside from the usual summer currency increases, caused largely by tourists, the Los Angeles Fed branch has not yet begun seeing a noticeable increase in cash requests from banks, Replogle said.

Meanwhile, the FBI has begun warning bankers and armored carriers to increase their security provisions in light of the extra cash being circulated around town.

“We haven’t publicly announced a heightened threat,” said FBI spokeswoman Laura Bosley. “But there’s always concern because of the increased vulnerability.”

Stafford said the FBI and other law enforcement agencies have been working closely with the banking industry and warning local bankers about a possible rise in burglaries and personal thefts because of the excess cash.

In an attempt to head off possible cash hoarding, a number of banks and industry associations are launching marketing campaigns that urge consumers not to cash out. They are stuffing brochures about Y2K preparedness in with customer bank statements, airing public service announcements in some areas and buying print ads.

“We believe if our message gets out, the public will start to see it’s not safe to carry around a large amount of currency,” said Replogle.

While 99 percent of banks met the June deadline for Y2K compliance set by the federal government, there still are concerns that not all segments of the public believe it. A March Gallup poll commissioned by the Federal Reserve and the Comptroller of the Currency (the agency that regulates banks) showed that slightly more than 20 percent of Americans fear a major banking meltdown when the clock strikes midnight on Jan. 1, 2000.

Financial institutions are undertaking outreach efforts to allay such fears. While banks say they are prepared, most admit there may be minor problems that will play out over the next year. And even the Fed is recommending that people take out enough cash for the year-end holiday weekend.

Downtown-based Sanwa Bank California prepared a package of Y2K information earlier this year, and made it available to customers by request. Some 700 customers, mostly companies, have so far requested the packets, according to Sanwa spokesman Keith Karpe.

Two of the nation’s biggest banks, Bank of America and Wells Fargo Bank, are sending out information to customers letting them know they are in compliance with government standards, but they are being careful not to go so far as to say they’re Y2K-error free.

Some banks have begun surveying customers to ascertain their monetary plans.

“We’re asking our business customers to tell us now if they want extra cash,” said Karpe of Sanwa. “We are expecting an additional demand.”