…does it make a sound? On Sept. 18, 2008, the banking system almost collapsed–no, really. A while back, I noted that there are at least two classes of media bias: one involves the interpretation of a set of agreed upon facts, while the other involves decisions as to what those facts are, or, even if something happened (an aside: while this was not controversial to the science-oriented commenters, this distinction is apparently beyond the ken of at least one journalism professor).
Anyway, this story, unearthed by C-SPAN, falls into the latter category (in the video, go to the 2:05 mark; transcript below video):
Transcript (italics mine):
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.
I couldn’t find a single story from that time that reported this. It’s kinda important, I think.
And here’s some extra bonus scary from the interview:
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.
One other thing: the Fed dumped $105 billion into the system in a few hours–and it had no effect. Basically, they lit this money on fire in the backyard for all the good it did. This should put the Blue Dog Democrats and Republicans who are cutting programs here and there in the Recovery and Reinvestment Act into proper perspective: it’s really much ado about nothing.