10 February 2009
Sept 08 - Run on the Banks
At 2 minutes, 20 seconds into this C-Span video clip, Rep. Paul Kanjorski of Pennsylvania explains how the Federal Reserve told Congress members about a "tremendous draw-down of money market accounts in the United States, to the tune of $550 billion dollars." According to Kanjorski, this electronic transfer occured over the period of an hour or two.
29 September 2008
2008 : The Perfect Storm
I've been talking alot this year about the potential for a "Perfect Storm". It's playing out right in front of my eyes and it's freaking me out!
The cresendo of our financial crisis coinciding with a presidental election makes for a "perfect storm". A political environment where doing the right thing conflicts with getting re-elected. Under normal conditions our political leaders are challenged enough to avoid doing whats best for themselves over whats best for the country.
So, now we need an immediate decision the will effect the future of all current and future Americans and the world!
- Whoa... What if we don't do it?
- How bad will it be?
- How long will it last?
Nobody knows... But everybody close to the problem just wants to throw $700B at the problem and hope. That scares me enough by itself to support the plan. I know there are better ideas out there, but they will take time. Time, i'm believing, we don't have...
But congress doesn't pass the bill? Maybe it's not so bad... would they let all those bad things happen? Wow! This is getting really confusing...
It was hard for me to fight the knee jerk reaction to jump up and down yelling about the incompetence of our congress. But then, I found myself very surprised that I could actually understand how this is a no win situation for them.
This is not a new problem. Many saw this coming long before the symptoms arose. The markets have been dealing with the issue for well over a year. Financial institutions, the Fed and the Treasury have been trying to solve this for a couple years. They failed! The house of cards is looking like it's ready to crumble... now they want to throw the problem to our congress, it's gotten to big to handle.
The Treasury may be in a conflicted position. All of their wall street and big business pals are going down, and they can do something about it! The issue for me is clouded in a lack of trust that the worse case scenario will be as bad as described for everyone and not just the risk takers that need to take the hard side of the risk equation.
Congress is just looking to go campaigning, to keep their jobs. Most have no clue about the financial products that are at the root of the crisis. But, now it's their responsibility. That is some heavy duty pressure... the reason I will NEVER take lightly the act of voting ever again.
So, why is it so difficult to take one positive step forward?
Why can't congress just pass a bill to backstop money market accounts, increase FDIC and SIPC coverage, stopping the bank runs and normalizing commercial paper markets?
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