Thank you, Jim, and good day, everybody. I appreciate being invited to join with all of you today to launch the Savings Bond campaign for Massachusetts.

Jim Benson and his team led a highly successful 1999 campaign. We want to thank everyone who worked to such good effect last year. And, as always, we then want to raise the bar a little higher and aim for even greater success in 2000.

It still sounds a little funny to me to say "2000", and maybe that is because of all the focus so many of us placed for so long on preparing for Y2K. In fact, just yesterday was the Leap Year date of February 29, and the Y2K preparations of the banking system and many other organizations included making sure that computer systems would be ready for Leap Year. You may know that every fourth year is Leap Year, but years ending in zero-zero are not leap years, but years divisible by 400 are leap years. With those twists and turns, it stood to reason that some computers would have been programmed incorrectly.

Fortunately, just about everyone's preparations seem to have been thorough, and we have passed safely through both New Year's and Leap Year in 2000.

Before we forget all about Y2K, though, I hope all of us who put so much effort into it will think about the experience, try to draw some lessons from it, and try to get some lasting benefits from all of that work; just as we want to reflect on, and learn from, last year's savings bond campaign, and look for lessons that can benefit this year's campaign. There are quite a few Y2K lessons and benefits at the operational level in organizations. Just to cite a few: most enterprises paid more attention to contingency planning and testing than ever before, and now understand at higher levels the importance of these activities; many now know for the first time about all the different computers and applications they have in all the nooks and crannies of their organizations; and, where new systems were the cure for old systems that could not deal with the year 2000, we will benefit from these new, more efficient systems for years to come.

On a broader level, I have learned a few, sort of "societal" lessons from our Y2K preparations at the Federal Reserve Bank of Boston, which included both our local efforts in Boston and New England, and our national activities. I would like to share four of them with you briefly today.

First, the "just in time" focus of so much business activity today may, on occasion, not be in the best public interest.

The "date problem" in computer systems was well known for over twenty years, and yet most of the resources to fix it were expended in 1998 and 1999. As a result, Y2K became more of a race against time than it really needed to be, and public anxiety increased more than it might have if businesses and governmental entities had tackled the problem earlier.

Why didn't they? A number of factors probably contributed to the "just in time" approach.

. Even in the early and mid-1990's, some people probably thought that most non-compliant systems would be replaced with new, compliant systems before the end of the 1990's. However, many were not.

. Usually it is more satisfying to commit scarce IT resources to projects that will produce new revenues from new products and services, or bring substantial cost reductions to the bottom line, rather than to a project such as Y2K, which to a considerable extent just remediated older systems. As long as Y2K could be put off in favor of more exciting projects, many put it off.

In the competitive marketplace and in the competitive stock market, a firm that committed substantial resources to Y2K work early, when its competitors did not, could suffer, both by falling behind with new product development, and by having market analysts compare its reduced earnings with those of competitors which had not yet spent much money on fixing Y2K problems. In 1998 and 1999, most competing firms were addressing Y2K, and competitive disadvantages were minimized.

While there were numerous exceptions among industries and individual organizations, Y2K by and large was addressed on a "just in time" basis. The results were highly successful, of course. This close-to-last-minute approach, though, contributed to public concern during 1998 and 1999. When people began to ask about their electric utilities, or their telephone companies, or their hospitals, or their supermarkets, or their public safety services, they may have been told, "We're working on it", or they may have been told nothing at all, because organizations were afraid of incurring liability by seeming to promise anything. For much of this period the messages to the public were not reassuring.

By the second half of 1999, when most Y2K work was done, and many organizations were feeling confident about their preparations, the public was receiving more information and reassurance, and public anxiety steadily subsided. All ended well. Still, we might ask whether the public interest would have been better served if the longstanding Y2K problem had been tackled earlier, and the response to public concerns in 1998 had been, "We've already fixed that problem; there's nothing to worry about." It is useful to reflect on how the "just in time" decision-making of individual organizations intersected with the broader public interest, because other issues may well bring the two together again.

Second, it takes more courage to offer reassurance in the face of uncertainty, than to predict big problems.

During the years leading up to the Y2K event there was very little downside risk for people who gained renown predicting widespread disruptions in people's lives. They obtained a lot of publicity for their ideas and themselves, and some probably enhanced their incomes. They also knew that if their predictions came true they would receive credit and have greater credibility in the future; and if their predicted disruptions did not occur, they could claim some credit for warning everyone so early, and thereby spurring people and organizations into greater efforts to prepare for Y2K and ward off the predicted problems.

In this situation, when nobody really could know all of the ramifications of the Y2K event, it took more courage to try to provide essential facts rather than colorful hype, and then to stick one's neck out by providing reassurance which, although rooted in the facts, still required a leap of faith. Because this stance was difficult to take, we did not have an abundance of such assurance coming to the public for quite some time. Ultimately, though, a cadre of leaders from the public and private sectors took this role upon themselves, to good effect.

Third, the press is interested in serving the public good, and needs leaders who can help the press to do so.

Most of the press stories about Y2K in 1997 and 1998 were about possible disruptions and some of the more extreme responses: people making plans to live in the forest, or underground, or with basements and garages full of canned goods and weapons. The stories were colorful, but not very comforting, and dismaying to people who were hard at work to address and remedy the Y2K problem.

When we in the Federal Reserve approached mainstream news organizations across the country early in 1999, to make the case for coverage of the facts about the preparations under way, in the banking industry in particular, to avoid Y2K disruptions, we found nearly all of them to be very receptive. They understood the need for balanced coverage, and they shared our concern about unwarranted public anxiety. They were very willing to report whatever facts we had to provide. Frequently they mentioned the difficulties they had had in getting business and governmental leaders to speak on the record about Y2K, and they welcomed our outreach.

As 1999 progressed, we saw much more reporting about Y2K preparations and messages of confidence from many sectors of the economy. The responsible press was quite willing to present the dry facts, not just the colorful hype. To some extent they needed more help from more of us to enable them to do so.

And fourth, our society has become highly interdependent technologically, and we need to share essential information among organizations on which we depend.

In American businesses and households, we depend far more upon private and public organizations to conduct daily business and our daily lives than was the case at the last turn of a century. We hardly can get through a day, at work or at home, without electricity and telecommunications. In the home, more and more we also depend upon cable television, access to on-line computer services, telecommunications services beyond our former "local phone company", and other external providers. At work, increasingly we do business with other organizations via electronic connections and computer networks.

As we enter the twenty-first century we would benefit one another by paying more attention to having the ways and means to share information with all who depend on us. Y2K helped us to learn how interdependent we have become, and acting on this realization can be one of the real benefits of Y2K.

Now, to stay with this theme of lessons learned, I think each day we are learning lessons about the importance of personal saving for our economy. Savings bonds are a good way to save, and more savings would help the country.

As you know, we have been enjoying a very strong economy for some years now. The gross domestic product has been growing at rapid rates, recently 4 percent or even more; in fact, growth in the fourth quarter of 1999 was almost 7 percent. The unemployment rate of 4 percent is at a 30-year low. And core inflation has been very low, at 2 percent or so annually. This has been an unusually good combination, and it is very unusual for it to have lasted for so long. In February, we broke the record for the longest economic expansion in our nation's history, and now in March it still is going strong.

All of this has been wonderful, but the economy is running hot, and the longer it does so, the more we have to worry about imbalances and, pressures that could threaten its future performance.

We have enjoyed much stronger than normal increases in productivity in recent years, but we do not know for how long such increases can be improved upon or even sustained.

We have seen that workers are receiving increases in compensation that keep them ahead of inflation - a welcome change from some past times. Those higher wages and salaries have not pushed up prices for goods and services very much. But for how long can this continue, especially as new workers get even harder to find?

These are just a couple of the tough questions to which monetary policy must pay attention. One more, particularly relevant to our purpose today, is personal savings

We see consumer confidence at all-time highs, and robust consumer spending has fueled most of the growth in our economy. Many people are feeling good about their personal financial situations because the job market is good, and the values of their mutual funds, or IRA's, or 401K plans, or other investments, including their homes, are so high. As a result, though, on average people are spending just about everything they are earning, and the personal savings rate is close to zero. People are acting as if the stock market is doing their saving for them.

Not only that, but the higher values of these investments lead people to spend even more than they might have spent otherwise. This "wealth effect" contributes to the country seeking to buy more goods and services than it is producing. Demand is ahead of supply, and this imbalance can lead to problems, such as higher inflation, if it goes on for too long.

Some increase in savings by American households could take some of the "froth" off of this very hot economy, help it to keep growing for a longer time at a somewhat cooler pace, provide more resources for investments that will benefit our standard of living in the future, and provide a cushion for consumer confidence for that time when people may not be quite so bullish about stocks.

Efforts in the Savings Bonds program over the past several years were guided by the need to create attractive investment options and encourage savings.

The first step was to simplify the Series EE bond and boost its interest rate to 90% of five year Treasury securities. This improvement has allowed the "Double E" to offer a better return, currently about 5.2 percent. When we consider the tax and education benefits along with the return, bonds are appealing for a portion of people's savings.

In September of 1998, the Treasury introduced a truly revolutionary security: the new Series I bond. For the first time, those most vulnerable to the effects of inflation can, for as little as $50, invest in a Treasury security that not only guarantees the future purchasing power of their principal, but gives them a real rate of return as well. I Bonds are currently earning 6.98%. This new bond provides rock solid assurance that inflation will never wipe out the value of whatever you are able to set aside. The I Bond also offers the same tax and education benefits as the Double-E Bond. Please take the time to look at the Treasury's brochure and learn more about the I Bond.

Some of the future challenges for Savings Bonds have to do with the society and workplace changes most of us are encountering today. Flexible work schedules and work locations provide challenges not envisioned twenty or thirty years ago. More than twenty-one million persons do some work at home as part of their primary jobs. Fifty-six million Americans work for small businesses without payroll savings plans, while eight million are self-employed. If we include the thirty-three million people who are retired, we begin to understand the need for new ways to communicate effectively about Savings Bonds and how to invest in them.

Recent innovations within the Savings Bonds Program have begun to address this need. The Treasury's web site (www.savingsbonds.gov) allows consumers to learn more about bonds on-line. In fact, as of the end of last year, bond holders can purchase bonds "on line" through the Savings Bond Connection. The Savings Bond Calculator is available on the web and provides a convenient and quick way to obtain bond valuations. This year, the Treasury will continue to grow the purchase options through the HomeBanking and Easy Saver programs. The convenience of Easy Saver is intended to help small business people and retirees. Information on these and other Treasury programs is available from the Boston Savings Bonds Marketing Office, located right next door at 10 Causeway Street.

We have a good product and a good message for the 2000 savings bond campaign. As with Y2K, we can take away some lessons from a good 1999, and apply them to help us raise the bar for 2000. And we can help the people of Massachusetts to help themselves, and help the country, by saving more of what they earn.

Thank you for coming today, and please help the savings bond program to achieve even greater success.