Of course the one thing missing from the conversation was WHY it was rushed through so fast. For whatever reason most of the people involved on the hill have been reluctant to say what was the impetus for such bold and swift I action. I guess they didn't think that many Americans would react well to knowing how close we came to the going off a cliff. Well at balloon-juice, John Cole had this video up that I feel like needs to get more play along with a partial transcript. Check it out.
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.
As I hear that and read the transcript I have to say that scared the shit out of me. We have gone all these months pointing fingers and casting aspersions on the people in Congress for voting for the TARP bill never knowing how close we came, literally a matter of hours away, to a total economic collapse not only in this country but worldwide. Now thats not to absolve the execution of the TARP bill which on a lot of counts has been an abject failure. But if you were in that room when you heard this kind of a dire warning could you have really said no to doing SOMETHING to avert the crisis? Mind you, many Republicans and a few
I'm a fixed income analyst and let me tell you that having the shit scared out of you is probably an understatement. There are several ways to have financial armageddon and that was one of them.
ReplyDeleteGood find. Most people who pay attention to economics and finance knew EXACTLY what was happening back in Sep/Oct...but it's interesting to see someone on the inside discuss it, and you're right seeing it in print makes it even more scary.
ReplyDeleteI know most will skewer me for this, but these situations are probably more dangerous than foreign military attacks on home soil, because the public and financially uninitiated (in their ignorance...not pejorative) don't see it so it's not real and therefore not supported.
I'm no fan of Paulson, but the urgency was needed and R's and D's who came out afterward's criticizing the rapidity of the passage are ignorant. Just like the R's and D's saying give the stimulus a few weeks to get it right are just as ignorant, because every layoff is like energy for the liquidty trap which at some point will be immune to any stimulus.
But hey it sounds good for one ignorant person to say to another ignorant person don't run so fast when neither of them can see what's behind them.
k1
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