We know that the Congress was pretty well spooked last September, when they passed the gigantic, but ineffective TARP. Here’s how Rep. Paul Kansjorski, an influential member of the Financial Services Committee described the scene recently on C-SPAN (via Paul Kedrosky)
On Thursday Sept 15, 2008 at roughly 11 AM The Federal Reserve noticed a tremendous draw down of money market accounts in the U.S. to the tune of $550-billion dollars in a matter of an hour or two. Money was being removed electronically.
The Treasury opened its window to help, and pumped in $150 Billion. But it could not stem the tide. It was an electronic run on the banks. They decided to close down the operation, to close down the money accounts. … If they had not done that, in their estimation, by 2 PM that afternoon $5.5-trillion would have been withdrawn and within 24 hours the world economy would have collapsed.
We talked at that time about what would have happened. It would have been the end of our economic and our political system as we know it.
Sounds pretty compelling. We’re glad that our entire economic and political system didn’t collapse. But if that’s what they were told was the rationale for TARP, what’s all this nonsense Congressmen spout about how the point of TARP was to get more home mortgages doled out again?