Collapse of Global Financial System Averted In September - $550 Billion Run On Money Market Accounts – Videos and Charts

Collapse of Global Financial System Averted In September - $550 Billion Run On Money Market Accounts – Videos and Charts

Congressman Paul Kanjorski, D-PA - see video below

(Best Syndication News) The Dow fell nearly 380 points on Tuesday even after the Senate passed their version of the American Recovery and Reinvestment Act of 2009. Things could get much worse and almost did just three days after Lehman Brothers declared bankruptcy last year (see the first video below).

Money Market Meltdown

On September 18th 2008, while most Americans went about their daily activities, there was a run on money market accounts that could have collapsed the world economic system. Unbeknownst to the American people, the Federal Reserve and Treasury scrambled to stop the hemorrhaging. They immediately closed down the money accounts and announced they would guarantee bank deposits up to $250,000. That was up from $100,000 previously. The quick action averted a disaster.

The very next day President Bush spoke to the nation (see video below). Looking scared, the President said “This is a pivotal moment for America’s economy… We must act now to protect our nation’s economic health from serious risk… Last night, Secretary Paulson and Chairman Bernanke and Chairman Cox met with congressional leaders of both parties—and they had a very good meeting. I appreciate the willingness of congressional leaders to confront this situation head on.”

At that time Americans did not realize what had happened and why there was an urgent need to deal with the crisis. We now know that the problem stemmed from a run on the money market accounts. “The Department of the Treasury is acting to restore confidence in a key element of America's financial system—money market mutual funds,” the President told reporters at that September news conference.

Last month, one of the congressional members revealed that there had been a run on money market accounts. Representative Paul E. Kanjorski of Pennsylvania told CSPAN that the day before the President’s news conference the world was poised for a great depression.

Congressman Kanjorski told CSPAN in January 2009 (see video below):

“On Thursday (Sept 18), at 11 in the morning the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S., to the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped a $105 billion in 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 out there.

If they had not done that, their estimation was that by 2pm that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed... It would have been the end of our economic system and our political system as we know it...

The next month on October 14th 2008 President Bush and Treasury Secretary Henry Paulson announced a plan to bailout the banks. Amazingly, compared to today’s swing in the stock market, the Dow hardly budged on those days in September (see chart below).

The standard coverage for FDIC insured deposits is scheduled to revert back to $100,000 on January 1st 2010. While CDs, saving / checking and some IRA accounts are guaranteed by the government, money Market and Mutual Funds were never covered by FDIC insurance.

By Dan Wilson

CSPAN Rep Paul Kanjorski Tells Americans About Near Collapse of System

President Bush Hints At Previous Day’s Near Disaster

Dow Jones Comparison



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