The good stuff doesn’t come until about two minutes in. Basically he describes an old fashioned run on money market funds on September 18, in the immediate aftermath of Lehman’s destruction.
The gist: The fed noticed that over the course of an hour, money market accounts experienced a half trillion dollar drawdown over the course of a couple hours. The Treasury stepped in, pumping 105bn into the system to no avail. Fed closed down the money markets for the day, and guaranteed 250k per account to stem the tide of the panic. The Fed’s estimation is that if they hadn’t done that, by 2PM there would have been a 5 trillion (with a t!) drawdown of money market funds, leading to a collapse of the US economy that day, and the collapse of the world economy the following week.
Yeah this is just some Congressman justifying his support for an unpopular program. On the other hand, this isn’t some random crank either - this is a guy on the House Banking Committee. Scary stuff, sounds like it’s just one more economic bullet we’ve dodged over the past several months.
Yep, this one got some play here at the time. Pretty friggin’ scary. I just looked at our money market account – which, due to financial-bookkeeping fatigue, hasn’t seen any deposits or withdrawals since September – and the interest payments on the constant balance have dropped by two-thirds over four months. The bond market rates must be getting even fuckeder.
