The Sky WAS Falling

Last year when the Congress and the President responded to the financial crisis by rushing to sign into law the 700 billion dollar TARP bill many Americans, myself included, were skeptical about it. In the ensuing months, many of our concerns were borne out as Secretary Paulson totally flipped the script when it came to implementing the first tranch of TARP money and instead of buying up toxic assets as he pledged that he would, he pushed the money off onto big banks with little to no oversight or accountability. Now personally I still felt like the TARP program must have done something right because the financial markets didn't totally crash. Still you would be hard pressed to find an average citizen who would have a lot of good things to say about TARP. One of the main criticisms is that it was rushed through Congress which all but ensured it would be done wrong.

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 Dumb Ass Blue Dog Democrats DID decided to play russian roulette with the world economy. That just sheds more light on how wreckless these people are. I don't take back all of what I had bad to say about the TARP bill but I admit now that at least I understand the motivation behind it.