Sam Spade
SamSpade
Atlas Star
Posts: 27,547
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« on: February 10, 2009, 05:03:55 PM » |
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This rumor has been thrown out numerous times in numerous media outlets, but I've found it to not hold much water. I do suspect that Paulson used it as a fear threat for TARP passage.
Here's why:
Kanjorski says that the bank run happened in an hour and a half. He also says that if they had not shut down the money market system that day, there would have been a $5.5 trillion removal by the afternoon. This type of a run would have taken the entire global system down in 24 hours by blowing up the commercial paper market.
Well, first off, they didn't shut down the money market system - rather, they made the promise to backstop it. Oops.
Moreover, the announcement in and of itself would have had zero effect if the bank run had not already run its course. You simply can't extrapolate one run across 24 hours to get the result you want, statistically, as Kanjorski wants to. Heck, it took nearly two weeks to get the backstop in front of Congress for a vote anyway. The system would have collapsed weeks before if the run was what Kanjorski claimed.
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