Three Hours from Disaster?

The powers that be have yet to put into plain English just want is going on with the economy and how their proposals will help it.

But Rep. Paul Kanjorski of PA says he canshed some light on things. Last September, he says, we were three hours from total economic collapse, due to an electronic run on banks (hat tip, David Hamstra on FB).

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.

Update: Others say this is complete fiction.

2 thoughts on “Three Hours from Disaster?

  1. 1) Who initiated the withdrawals? Was it a series of automated programs? It doesn’t sound like it, as manual intervention was able to stop the run. The answer to this question could lead to further questions that may determine the true cause of the financial meltdown.

  2. Check out Portfolio.com blog on Kanjorski comments. Feb 11 2009 4:51PM EST

    Kanjorski and the Money Market Funds: The Facts
    With the Kanjorski Meme still spreading (see Ben Smith, Andrew Leonard, Moldbug, and more), I think I’m finally able to squash it with some hard figures: there never was a $500 billion outflow from any asset class in the space of a couple of hours or even weeks, and the Fed never shut down or froze any money-market accounts…

    Link to blog: http://www.portfolio.com/views/blogs/market-movers/2009/02/11/kanjorski-and-the-money-market-funds-the-facts?

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