Editor's Note: Originally published Feb. 8, 2009
We are reposting this story in light of today's revelation:
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."