According to Rep. Paul Kanjorski (D) (PA-11), in mid-September of 2008, the United States of America came just three hours away from the collapse of the entire economy. In a span of 2 hours, $550 billion was drawn out of money market accounts in an electronic run on the banks.
Rep. Kanjorski: "It would have been the end of our economic system and our political system as we know it."
Kanjorski's bombshell begins to detonate at roughly 2:10 into the video.
Partial transcript below the fold.
I was there when the secretary and the chairman of the Federal Reserve came those days and talked to members of Congress about what was going on... Here's the facts. We don't even talk about these things.
On Thursday, at about 11 o'clock in the morning, the Federal Reserve noticed a tremendous drawdown of money market accounts in the United States to a tune of $550 billion being drawn out in a matter of an hour or two.
The Treasury opened up its window to help. They pumped $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 further panic and there. And that's what actually happened.
If they had not done that their estimation was that by two o'clock that afternoon, $5.5 trillion would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed.
Now we talked at that time about what would have happened if that happened. It would have been the end of our economic system and our political system as we know it.
Hat tip nicta.
On the day the electronic run on the money markets happened, September 18th, the Dow Jones Industrial Average closed at 11,019.69. This was roughly two weeks before the huge market collapse during the first week of October 2008. As an aside, I wonder how many members of Congress got cashed out their stocks that day?
In a blog post at The Motley Fool, TMFSinchiruna describes this clip as "The One Jaw Dropping Video that Every Fool Must See".
He first gives some background to what is known about that fateful day on Capitol Hill.
Fools who read my blogs regularly know I have been fascinated by what may have been included within the dire warnings issued to members of Congress by Paulson and Bernanke behind closed doors on Thursday, September 18, 2008. As the debates lingered on over the week that followed, several members voiced their sense of shock over the severity of the warnings, while refusing to divulge the details to a public that deserves to know.
Representative Sherman later revealed that members were warned that Martial Law would result if the $700 bailout plan was not passed, and Iguadland10 posted another video ascribing that particular warning to Paulson.
The New York Times quoted Senator Dodd as jumping in when Charles Schumer described the meeting as 'somber': “Somber doesn’t begin to justify the words,” he said. “We have never heard language like this.” Also from NYT: Although Mr. Schumer, Mr. Dodd and other participants declined to repeat precisely what they were told by Mr. Bernanke and Mr. Paulson, they said the two men described the financial system as effectively bound in a knot that was being pulled tighter and tighter by the day.
He notes the only thing that has changed since the money market run in September is "that more money has been thrown at the problem, but the problems have continued to mount in the meantime. I hope financial disaster can be averted, but judging by what I've witnessed so far that hope is muted at best."
Wow.
The final word goes to Rep. Kanjorski though:
Ya know, we're not any geniuses in economics or finances... We're representatives of people. We ought to take our time, but let the people know this is a very difficult struggle.
Somebody threw us into the middle of the Atlantic Ocean without a life raft and we're trying to determine what's the closest shore and whether there's any chance in the world to swim that far. We. Don't. Know.
Yikes.
Cross-posted from Docudharma.
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