« Kanjorski Reveals Paulson's Closed-Door TARP Threats »
(Originally Published February 8, 2009: This was one of our most popular stories in our first 4 weeks. It's still relevant given this exchange between Paulson and Kanjorski just 13 days ago on Capitol Hill.)
In the above video starting at the 2:20 mark, House Democrat Paul Kanjorski details a chilling scenario communicated to select members of Congress during emergency discussions with Treasury and Fed officials on Thursday September 18th.
As readers know, several Congressional members have alluded to a private meeting with Paulson and Bernanke in which vague economic Armageddon was threatened if Congress did not immediately hand Hank $700 billion, with no oversight. As the political debate raged over the next 15 days, several members expressed a sense of shock over the severity of the secret warnings, while refusing to divulge the details to a concerned public. Representative Sherman of California later accidentally revealed that members were warned that Martial Law would follow if the $700 bailout plan were not approved quickly. Days later it was confirmed that the warning was delivered by Treasury Secretary Paulson. Listen while Kanjorski relates the fear about an electronic run on the banks that was apparently part of the Congressional scare tactics employed by Paulson and staff. You will notice that he says members were told that within 24 hours, the entire political structure of the United States would collapse. Talk about hitting a Congressman where it hurts, Paulson went straight for their political testes.
I don't doubt Kanjorski's telling the truth. And I have been very curious to know exactly what was said in the private meeting, that turned the entire sad lot of them ashen with fear. Kanjorski's statement supports the thesis that the Fed and Treasury were not playing by the rules, and that they dissembled and utilized apocalyptic fear-mongering to frighten Congressional leaders who were already intimidated by the seeming complexity of the financial issues. Tell me in comments if you think we were at Armageddon's doorstep that day. Without some show-me, I'm not buying it. The truth is they utilized the panic for political benefit and hoisted cataclysm upon already cowering Congressional members.
Furthermore, it's not plausible that an outflow of the proportion described above could have been slowed by the enhanced money market guarantee that was announced. A mid-afternoon boost of the FDIC insurance limit from 100k to 250k is not enough to assuage a market that has seen $550 billion evaporate in 2 hours. Even if you shut it down early for the day, it still doesn't pass the smell test. Kanjorski has unwittingly revealed evidence that Treasury and the Fed embellished (lied) to members of Congress to further their case for TARP approval. And though never punished directly for their dissembling nature, they have been exposed in the aftermath as fear-mongering apologists and protectors of the failed banking class. The integrity of both federal institutions is now openly questioned by taxpayers and elected officials. This is not a good place.
Transcript of Rep. Paul Kanjorski statement on C-SPAN:
"It was about September 18th [sic]. … On Thursday at about 11 o’clock in the morning the Federal Reserve noticed a tremendous drawdown of, uh, money market accounts in the United States to the tune of $550-billion was being drawn out in in a matter of an hour or two.
The Treasury opened up its window to help, and pumped in $105-billion into the system, and quickly realized it could not stem the tide. We were having 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 would have collapsed the U.S. economy 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."
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Thursday, July 30, 2009 at 8:52PM
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Reader Comments (21)
I find it hard to believe that that the simple FDIC guarantee on money market funds solved the crisis. We need to hear a lot more about this.
1. Campaign contributions
2. Guaranteed job on boards of their corporate masters
3. They are in on the scam and have already placed their bets
There is nothing preventing us from completed doing away with the Fed and every one of these financial institutions. We can always go back to Greenbacks or issue U.S. Treasuries directly into circulation as our monetary base.
The Fed is the Wizard of Oz. They wave a magic wand bringing Federal Reserve Notes into existence from nothing and then charge the U.S. Government interest on the privilege of exchanging our IOUs with their fancy monopoly money. They then resell those IOUs to investors for additional profit. No one gets it. All of these write downs from banks on bad loans is freaking imaginary money. When someone signs a dept contract, the banks create that money into existence from nothing (who knows if the 10:1 fractional reserve is true anymore) and report it as earnings. If just 10% is repaid, the banks suffer no real loss b/c that money was a fiction to begin with. Even the original 10% was a fiction b/c the Fed has no tangible assets to back it. Good luck exchanging your Federal Reserve Notes for food, water, or clothing when our nations political and economic systems fail, even with continued bailouts. It will happen sooner than you think. Well, at least we kept a few inbred SOBs wealthy in the meantime.
Think about it, whenever you get the hard-sell when buying something, it is instinct to be cautious and skeptical. If someone tells you the world is going to end tomorrow unless you give them whatever they are asking for, you usually ask for some hard evidence to back up their claim. If truly ignorant, Congress could at least have brought in independent experts on both sides of the issue to rigorously look at the evidence and give their best analysis. Fed and Treasury gave no evidence and any expertise they provided was certainly a conflict of interest. Paulson freaking came from Goldman Sachs and spoke repeatedly in congressional hearings about removing leverage limits. Talk about a fox guarding the hen house. These rascals gobbled up the hens and then asked for more. Congress has completely abdicated their responsibility to uphold the Constitution and protect the American people. The appeal to "act now before it is too late" is the oldest con in the world. There is no excuse.
So, now that we know that, let's get really angry and arrest these guys and take back our government and our money and our childrens's futures and...ooh, look "Survivor" is on. Mmm, Cheez Doodles. I wonder if I could eat seventeen Big Macs if I took out the pickles. blue, I like blue. Mmm, mmmm. la la lah.
Sorry, what were you saying?
-US Consumer, an Average American
I think the shocking part was the claim by treasury that the world economy would grind to a halt in 24 hours.
It was hyperbole at a minimum and perhaps a purposeful lie. It was taking advantage of people who are clueless about banking and securitzed products, and then feeding them fear.
The importance of this video and admission by Kanjorski is that we NOW finally know what was said to scare the leadership.
So now we know they will say anything to get what they want. It is no longer conjecture. They should be assumed to be liars.
And I think you are seeing it openly with the reception Geithner and Summers are getting from Capitol Hill.
I liked your post, however. You have it nailed. Numb to the pain are the people.
yes. i agree but i would offer that the concept of dismantling the Fed is too scary for some people to handle.
give it time. 18 more months and the public's patience will be gone. then we might see some real changes.
keep posting here.
i concur in frustration about paulson causing this mess (the 2004 sec rule change on leverage) and yet he was never publicly vilified by the media.
the reason is the same as politicians. the media are so clueless about what's going on and so worried about their own 401ks that they're afraid to take on paulson and bernanke out of fear.
People pull their money out because they lose trust. TRUST is what needs to be addressed, not the fact that trillions of dollars would be withdrawn by 1pm. People lost trust because they woke up to the big scam, not because everybody wanted to pull their money out at the same time. And why is the financial system a big scam? Well, because banks are involved in a scam called Fractional Reserve Banking where they lend other people's money while they guarantee their money to be available whenever they need it. But how is this possible? Well, it is not. The bank pretends the money is there but it's not - they just hope that not enough people will show up to ask for THEIR OWN MONEY This is why fractional reserve lending is a scam and for as long as we tolerate fractional reserve lending practices we will have runs on banks and other financial institutions. We will never have a stable financial system until these frauds are addressed and trust is restored permanently.
it was ugly today for sure. markets don't believe in geithner's non solution.
the reason he had no specifics is tehy still can't make it work.
pay too much for assets, taxpayers screwed.
offer too little and banks won't play.
do what Stiglitz said. let them all go.
start fresh with new or newly re-capped banks free of toxica
you definitely know your stuff
you're great to have around.
thanks
system go away .
I can tell you what Mr middle class is waking up and will snap at once.Once you back the normal
person in a corner were they can no longer run .It will be on.Not to sound like Ken .LOL
But the economy means something to the people when they cant work or eat.