Wednesday, February 17, 2010

The electronic run on banks nobody seemed to notice

By Mary Claire Kendall                          
Sixteen months after the 11 a.m. simultaneous withdrawal of billions of dollars out of money market accounts in the aftermath of Lehman’s demise a few days earlier, no one seems to care about the dimensions of this event.

After all, this catastrophic event did not have quite the physicality of say an actual bank run. 

George Bailey, played by Jimmy Stewart,
in It's A Wonderful Life (1946), confronting the run on
the Building and Loan, RKO Pictures
There were no investors standing in line waiting to take their money out for Americans to see just who they were—from what country, wearing what kind of clothes, honest or squirrelly looking, working in tandem with each other? Just computer generated orders simultaneously withdrawing billions of dollars adding up to $550 billion within about an hour.

And, certainly, if it were an act of economic terrorism, which no one seems to have the imagination or cojones to raise, the visual is not there. No Boeing 737 ramming into the Twin Towers, bursting into flames, innocent victims burning alive jumping out the windows to their death, prior to the buildings’ collapse into rubble.

But, make no mistake, this electronic run on the banks of Sept. 18, 2008, was every bit as catastrophic, with numerous victims.

Sure, it could be pure coincidence that exactly at 11 a.m. a wave of concerned investors all decided it was time to electronically withdraw their funds thus creating this crescendo drawdown effect setting in motion a worldwide panic.It could be coincidence. But, it’s doubtful.

The fact that the identities of those who simultaneously decided to withdraw their money at 11 a.m. on Sep. 18, precipitating this panic, were never released, does lead one to question whether or not something sinister was at work.

Is there no one else with even the vaguest curiosity to ask if it was a coincidence or not? And, to suggest maybe an investigation is in order to deliver that vaunted “transparency” that voters seemed to believe they would get after the 2008 elections.

If nothing sinister was at work, then why so much secrecy concerning the destination of this $550 billion in money withdrawn on Thursday, Sept. 18, and those responsible for redirecting these funds out of the U.S. money markets.

Surely the money didn’t go back into the American economy.

No, $550 billion was drained away from the American economy, the consequences of which we suffer to this day.

The exact contours of this event were described by Rep. Paul Kanjorski (D-Pa.) on C-SPAN on Wednesday, Feb. 11, the day before the 200th anniversary of Abe Lincoln’s birth.

An enraged caller had just erupted over the ill-advised $700 billion bailout a few months earlier and Rep. Kanjorski felt pressed to reveal what Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke had told Congress behind closed doors, which so shocked them into supporting this mind-bogglingly huge bailout.

“On Thursday [Sept. 18, 2008] at about 11 o’clock in the morning,” Kanjorski began, “the Federal Reserve noticed the tremendous drawdown of money market accounts in the United States to the tune of $550 billion dollars being drawn out in a matter of an hour or two. The Treasury opened up its window to help. It pumped $105 billion in the system and quickly realized that they could not stem the tide.”

At that point, officials realized, Kanjorski relates, “We were having an electronic run on the banks.”

Depositors lining up outside the Building and
Loan in It's A Wonderful Life (1946), RKO Pictures

In response, Kanjorski continued, “They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn’t be further panic out there and that’s what actually happened.”

And, if nothing had been done, Kanjorski revealed, “their estimation was that by two o’clock that afternoon, five and 1/2 trillion dollars would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States and within 24 hours the world economy would have collapsed (which would have meant) … the end of our economic system and our political system as we know it.”

Kanjorski concluded, “Someone threw us in the middle of the Atlantic Ocean without a life raft. And, we’re trying to determine which is the closest shore, and whether there’s any chance in the world to swim that far. We don’t know.”

But why is no one in the least bit curious to know who that “someone” is who “threw us in the middle of the Atlantic Ocean without a life raft”—the consequences of which have so damaged our economy’s job-creating engine?

This writer, for one, would like to know.

Mary Claire Kendall is a Washington-based journalist and screenwriter.

Originally published in The Daily Caller on January 15, 2010, after which it went viral on the Internet, posted at various sites including Free Republic and Defense of the Republic among many others.

Saturday, February 6, 2010

Time to channel Honest Abe to fix Obama’s rhetoric/reality gap

By Mary Claire Kendall

President Barack Obama’s challenge to House Republicans in Baltimore to “close the gap between rhetoric and reality”—at the first of what the White House hopes will be monthly confabs, cameras rolling—seems more the product of “projection.” In psychological terms, this means someone who complains about another’s defect is, in reality, only projecting their own shortcomings.

His response to Rep. Tom Price (R-Ga.) was particularly telling. Price essentially said ‘Republicans have a health care plan (i.e., Price’s plan), yet you say otherwise, most recently in the State of the Union; so what am I supposed to tell my constituents?’ Obama first said, ‘No I didn’t say that; I said this’ in what amounted to a distinction without a difference. Then, Obama further clarified, Republicans need ideas that work and can’t say tort reform is all that’s needed to reform health care. That assertion, of course, does not even vaguely resemble Republicans’ actual legislative proposals.

The State of the Union, as Price hinted, was a veritable treasure trove [1] of Grand Canyon-sized whoppers bearing little resemblance to reality.

Even Speaker Nancy Pelosi “mocked Obama [2] for suggesting that the two measures (House and Senate health bills) are 90 percent similar,” noting they are only “75 per cent the same.” (Washington Post, January 29, 2010)

Rep. Devin Nunes (R-Calif.) in interviews with local California TV stations following Obama’s State of the Union also honed in sharply on this rhetoric/reality gap, highlighting its flights of “fantasy.” Nunes found the image Obama drew of job creation, given the larger picture of job distress, particularly striking.

“You can see the results,” Obama boasted, “of last year’s investments in clean energy… in the California business that will put a thousand people to work making solar panels.”

Yes, but what, Nunes asks [3], about the over 30,000 residents of his San Joaquin Valley district deprived of their livelihood because of Obama administration environmental policy. In the town of Mendota, alone, joblessness stands at 40 percent. Water in the Central Valley was shut off in early 2009 to save the three-inch long delta smelt, a bait fish, now happily swimming around the Sacramento-San Joaquin River Delta, while thousands of California farmers, and so many others impacted by lost agricultural production, languish without work. That’s the not-so-sunny side of Obama’s handiwork.

Or consider the issue of curbing lobbyist influence. Obama’s State of the Union rhetoric made it seem he’s wearing the white hat. But, since his Inauguration, he’s issued more waivers than ever for “revolving door” candidates and lobbyists.

Then, there’s Obama’s free-trade obfuscation. “We have to seek new markets aggressively, just as our competitors are,” said Obama. “If America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores.” Rep. Peter Roskam (R-Ill.) said in Baltimore, if allowed to pass, these free-trade agreements would instantly generate good paying jobs; but that the Democrat majority has bottled them up for years. Yet, Obama conveniently forgets to mention his party’s primary role in depriving Americans of desperately needed FTA-generated jobs.

That glaring oversight makes the blame Obama heaps on Republicans for the nation’s plight as well as less-than-candid representations about so much else, e.g., budget, economy, taxes, all the more stunning—like a gong bell incessantly going off, a bell that sounded loud and clear this week when Obama released his $3.8 trillion FY 2011 budget. As Paul Ryan (R-Wis.), ranking Republican on the House budget committee, said, its “few cosmetic budget maneuvers… give the illusion of restraint.” But the reality is far different: more spending, taxes, deficits ($1.3 trillion in 2011) and debt.

One can only wonder what Honest Abe must think of the man so many breathlessly compared him to not so long ago.

Mary Claire Kendall is a Washington, D.C.-based journalist and screenwriter.

Article originally published in The Daily Caller on Friday, February 5, 2010.

URLs in this post:
[1] treasure trove:
[2] mocked Obama:
[3] asks: