If you’ve listened closely to top economic officials in the last few months, perhaps you — like me — got the impression that there was something — something serious — they weren’t telling us. Why else would so many politicians be so quick to pass legislation they hadn’t really read, giving so much unchecked power to the treasury secretary?
True, they were hinting at it, but they wouldn’t come right out and say it.
In the last few days, a video has raced around the Internet (which was actually made in January) at a fever pitch which appears to reveal what that something is: A run on the nation’s banks that allegedly brought the nation within hours of collapse.
The details came in a C-SPAN interview with Rep. Paul Kanjorski, D-PA.
Here’s the facts and we don’t even talk about these things: On Thursday (September 18) at about 11 o’clock in the morning, the Federal Reserve noticed a tremendous drawdown of moneymarket accounts in the United States, to the tune of $550 billion. It was being drawn out in the matter of an hour or two. The Treasury opened up its window to help. They pumped a $105 billion into the system, and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account, so there wouldn’t be any further panic out there and that’s what actually happened.
If they had not done that, their estimation was that by 2 o’clock that afternoon, $5.5 trillion would’ve been drawn out of the money market system of the United States, would’ve collapsed the entire economy of the United States, and in 24 hours, the world economy would’ve collapsed.
We talked at that time about what would happen if that happened. It would’ve been the end of our economic system and our political system as we know it. That’s why, when they made the point, ‘we’ve got to act and do things quickly,’ we did.
Here’s what we don’t know: We don’t know if any of that is true. Kanjorski hasn’t elaborated on it since, and today he had only this to say during a hearing with Federal Reserve Chair Ben Bernanke (as quoted by a New York Times live blog).
Paul Kanjorski, a Democrat from Pennsylvania, says he thinks “All of you,” including the chairman and the current and previous presidents and Treasury secretaries, “have failed for all of us, particularly the general public, to enunciate what the problem is.” He wants to know what “we can do to facilitate” the explanation of the problem to the American public.
So on the one hand he says he describes what the problem was and on the other hand he complains that nobody is saying what the problem was (and, apparently, still is.)
Rep. Brad Sherman, D-CA., took to the House floor a week or so later and, without citing too many specifics other than the prospect of martial law, suggested it was all a con to get the bailout passed.
Still, Motley Fool adds it up by comparing it to a confirmed run on the banks in London, and concluded that, yes, we were within 3 hours of economic disaster.