Economic Armageddon Narrowly Averted According to Dem Rep

I think I found the original version of this clip via a Tweet from theeconomysucks but what it talks about is pretty damn newsworthy and I'm a little surprised that it didn't merit some sort of mention in the American mainstream media when the event occurred. Essentially, Pennsylvania Democrat, House Representative Paul Kanjorski tells C-SPAN, on February 6, 2009, that, last September (2008) he and other reps were told by the Fed that the world was a single day away from a total and complete economic meltdown.

I'm not kidding.

The original video, which I found here: http://www.liveleak.com/view?i=ca2_1234032281 but can also be found on YouTube here: http://www.youtube.com/watch?v=_NMu1mFao3w , ends up being much longer than I think it needs to be to get the point across, so here is the important 1m37s where Kanjorski explains what happened.

In case there's anything funky with that video player, you can also watch an mp4 version of it or download it here and the original clip, also converted to mp4, is here.

Let me nutshell it. According to Kanjorski:

1) The was an electronic run on money market accounts on the morning of September 18, 2008.

2) The Fed watched as $550 billion was pulled from these accounts.

3) The Treasury "opened up its window" and "pumped $105 billion in the system and quickly realized they could not stem the tide."

(I'm not sure what point 3 literally means, but that's what he said.)

4) They then closed down the accounts, stopping any more money to be removed and then upped the FDIC limit to $250,000. Yeah--this is why they did that. I saw it in the news back then and wondered why that was specifically done.

5) If they hadn't acted as soon as they did, the Fed told the House reps that $5.5 trillion would have been removed from the US economy by 2pm that afternoon. The conclusion the Fed reached at that point was that the US economy would have faced a complete crash and would have taken the world economy with it within a day.

According to Kanjorksi, they felt that if that had happened it would have been "the end of our economic system and our political system as we know it."

Missed it by THAT much!

Oh, I kid the end of the civilized world, but I love it!

Joking aside, it's pretty damn scary that we came this close to economic apocalypse and no one seems to have reported on it in the news. Apparently, it's all over the blogosphere now, but the only thing I found on it that was more than a WTF post (like mine is) was a post at BaltimoreChronicle.com which seems more concerned with corruption than the fact that the economy almost evaporated last year.

There's also a transcript for the February 10, 2009 (yesterday) episode of Countdown that you can read which also talks about this story, but it doesn't go into much depth. It just reassures us and blah-blah-blah. What it completely fails to do is really explain why this "electronic run on the banks" happened, how it could happen to the tune of $5.5 trillion and why the hell this wasn't major goddamn news across the world. It also fails to give us a legitimate reason to trust that it won't happen again.

Let me put it simply: if the US Treasury Department hadn't upped the FDIC limit to $250,000, the economy wouldn't be here today.

The really scary thing is that all the Treasury had to do was SAY something that sounded good to people. It doesn't appear to me that anyone in government or at the Fed is doing anything differently due to the economy almost melting down.

There's something seriously wrong with that.

UPDATE 4:34pm: found a post at fool.com about this from two days ago that calls the date of Kanjorski's comments on C-SPAN to be January 28, 2009. That post is also an interesting read, though doesn't tell us anything new at this point.