“Financial Troubles Nearly Crushed Economy, Rep. Says”

You don’t know how far you can fall until you’ve been to the edge, and this nation teetered on the edge just months ago.

Rep. Paul Kanjorski (D-Pennsylvania) went on CSPAN in late January and described how close the United States economy came to complete collapse.

The entire economic and political system of this country was strained on Sept. 18, 2008 as Congress failed to agree on a ‘bailout’ plan for the struggling financial institutions.

At 11 a.m. that day, the Federal Reserve noticed a $550 billion (yes, billion with a b, like half a trillion.) drawdown on money market accounts in the U.S. The Treasury turned around and gave the banks a $105 billion injection, but it wasn’t enough.

The run on the banks was on.

The government decided to shut down all withdrawals from money market accounts, but guaranteed them up to $250,000. Previously, money markets weren’t insured by the FDIC.

Rep. Kanjorski said they estimate that by 2 p.m. that day, $5.5 trillion (yes, trillion) would have been withdrawn from United States money market accounts.

The U.S. economy would have collapsed.

The world economy would have collapsed 24 hours later.

Our economic system would have ended. And our political entities, like the Fed and the Treasury, would have faded into the distance, now being entirely worthless organizations.

There has been much criticism of the trillions of dollars that have flown to banks, car companies, insurance companies and more. Yes, these irresponsible companies should pay for their mistakes.

But at the same time, the citizens of this country nearly caused a collapse far worse than we ever could have imagined. People ran from banks in fear, clutching their hard-earned cash close to their chests.

As Rep. Kanjorski said that day, without a banking system, we have no economy. People need to trust their banks, and trust that their money is safe.

When bank runs nearly collapsed the economy in the 1930s, the government created the Federal Deposit Insurance Corporation to create confidence in the banks, confidence that deposits were safe, and that the federal government would back it all up with their strength and might.

That confidence has been shattered. Now, the pressure is on the government to find a way to solve these massive problems.

We came close to being sunk by our own distrust and fear. We saw the edge, and we were perilously close to tipping. But we were rescued, not by a bailout for the rich, or for Wall Street, but for the entire economy.

Leave a Reply

Back To Top