Rep. Paul Kanjorski is the chairman of the Subcommittee on Capital Markets. He's had a front-row seat to the continual cycle of crisis and intervention that's gripped the government in recent months. And on C-SPAN this week, he explained how close we came to losing everything (it's at 2:20 in the video):
On Thursday (Sept 18), at 11am the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S., to the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped $105 billion in 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 out there.If they had not done that, their estimation is that by 2pm that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it.
The recession is no fun. But fundamentally, it feels like a recession. Feels like it'll follow the path of a recession. Feels like it will end like a recession. But then, there's this other thing that's hard to feel, and hard to grasp, which if it detonates, turns this from a recession into something much worse. But it's hard to keep that in sight, because unlike the recession, the dangers of financial market runs are hard to feel.
