USA was 3 hrs away from Economic, Political Collapse in September 2008

(better late than never – promoted by buhdydharma )


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.”


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.



Cross-posted at Daily Kos.



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  1. Somehow I don’t think we’re getting out of this one…

  2. Can’t watch the clip (computer problems) but the info is all new to me.  Somebody at Orange asked what I thought was a good question: how does an electronic run on the money markets collapse the entire financial system?  Wouldn’t they just be transferring from the MMs into other financial institutions?  Sure, it would collapse the MMs–but it’s not like it’s being hidden in a mattress, it’s still going to be in the financial system somewhere, right?

    • Edger on February 10, 2009 at 16:26

    I quoted the first part with a “read the rest here” link, over at They Gave Us A Republic…

  3. assigning–with minimal oversight and conditions–another digitally generated gazillion dollars to bail out a financial sector that has already sunk. Six months from now we will discover that the bailout funds just continue to pour down the multi-trillion dollar bottomless sinkhole of over-leveraged bad gambles on Ponzi-style toxic derivatives. There isn’t enough digital money in the universe to prop up the balance sheets of these bankrupt firms.

    So here is a modest alternative for the financial sector:

    (1) Declare these institutions bankrupt, for they are indeed insolvent.

    (2) Temporarily nationalize them–i.e., take full administrative control.

    (3) Fire all of the top management.

    (4) Disband the complaisant boards of directors, who obviously failed to exercise responsible oversight.

    (5) Seize all of the assets of the fired managers, including their pension funds (they would do the same to their workers, after all). Halt their health benefits (as they do with their workers). Let them try to live on Social Security and depend on Medicare (like their fired workers).

    (6) Indict, try, and convict the senior managers who approved, distributed, and accepted bonuses at the same time that they bought into public bailout programs. The charges are fraud and theft of public funds.

    (7) Zero out the shareholders. They invested in badly managed firms, and they lost. Tough luck. That’s how markets and risk work.

    (8) Sell off any real financial and physical assets to the highest bidders, while at the same time instituting a serious anti-trust policy that ensures that no firm ever again will be allowed to become “too big to fail.”

    (9) Oh, and also fire and prosecute any Fed, Treasury, and SEC officials who were criminally negligent in failing to detect fraud in the financial industry–or who were bribed with money, favors, or promises of future revolving door employment in order to look the other way.

    I’m still debating whether to suggest as (10): Include in the separate fiscal stimulus package a federal subsidy for manufacturers of guillotines. There is space available for several newly manufactured models in public squares on Wall Street, the Gold Coast of Connecticut, K Street, and Capitol Hill.


  4. I had called his office — the first time in my life I had ever even cared to know who my rep was — earlier in the day to object to the proposed bailout. I was working for the Obama campaign and told Kanjorski’s office rep that if Kanjo voted for the bailout, I would not be voting for him.

    I received a phone call about 7pm and was invited to be on the conference call and make a comment.

    and it was my comment that inspired him to tell this story about the run on money markets – which woke me up, because most of the money I had at that moment was in a moneymarket account, not a savings account.

    It was after that I was making calls to wavering voters who said they woudl not vote for Obama if HE voted for the bailout, which made me completely incredulous, because McCain was voting FOR the damn thing too – so if someone was giving me the bailout as a reason not to vote for Obama when there was no difference in the positions of the two presidential candidates, I was forced to politely call “bogus” and ask what their real reason was.

    Ah the good old days, when race relations and latent bigotry was our biggest worry.

    I dunno what to make of all this. I think the Republicans in Congress and the Senate are all rich enough that they might lose one or two of their multiple houses, but not the last one, and they can afford to cry and whine about principle to honor Reagans fantasies and make an ideological stand – hoping Obama really does fail – until the rest of us come to set fire to their houses because we’ve all lost everything.

    Makes some of us wonder if it wouldn’t be a better idea to march on their houses now while we still have ours and make sure they get the point before it’s too late.  

  5. to Countdown, Keith said he was going to report on this story. I’d be willing to bet that he picked it up from your diary at dkos.

    Way to go Magnifico!!!!!!!!!!!!!!

    • Edger on February 11, 2009 at 03:56

    But do we know who was pulling out of the money markets? In which countries? There are records of people.


    • robodd on February 11, 2009 at 06:43

    except the absurd notion that high finance really runs the world and tells us how to live our lives.

    Life would go on.

    We can make it without the fraudsters and the cheats.  Let them count their worthless paper in hell.

  6. Problems we’re seeing here are being echoed around the globe:  

    UK Economy faces deep recession

    Protectionism row clouds looming G7 meeting

    “…Germany took a swipe at France on Wednesday for offering state aid to its carmakers without consulting its European partners and vowed to raise the issue of rising protectionism at a weekend G7 meeting in Rome…

    The row erupted after French President Nicolas Sarkozy urged domestic carmakers last week to move production back home from countries like the Czech Republic…That drew a sharp response from Prague..”

    China’s rising unemployment leaves migrant workers fearing for jobs and China’s exports fall for third month.

    While world leaders try to come up with solutions that will help improve the economies in their countries, the bankers continue to refuse to acknowledge the malfeasance, greed, and corruption and in some cases, criminality in the banking industry that is largely responsible for the mortgage bubble and its ultimate bursting:

    (Bank of England Governor) Mervyn King Refused to apologize for not spotting recession.

    Bank CEO’s go to Washington Defiantly Unapologetic

    If those solving the problem fail to study and acknowledge what went wrong, why it went wrong, and the total extent of the problem–they can’t fix it.  Our lawmakers are still playing politics instead of putting out the fires & the economy continues to tank at warp speed.  They are still determined to hand over money and the very same bankers who caused the meltdown but who refuse to acknowledge they did anything wrong.  

    I hope the stimulus works, because if it doesn’t, we’re all going to suffer even more.  

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