Congressman: Fed staved off economic collapse
Here’s a remarkable recollection of a near economic collapse that occurred in mid-September. Speaking is Rep. Paul E. Kanjorski of Pennsylvania, chairman of the Financial Services Subcommittee on Capital Markets.
Kanjorski notes that $550 billion was withdrawn from money market accounts in “an hour or two.” Federal officials reacted quickly, he said. The following section occurs at about the 2:20 mark of this C-SPAN video.
The Treasury opened up its window to help. It pumped $105 billion dollars 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 out there. that’s what actually happened. If they had not done that their estimation was that by 2 o’clock that afternoon, five-and-a-half trillion dollars 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.
It would have been the end of our economic system and our political system as we know it.
Don Mecoy
Business Writer
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