House Capital Markets Chair: first $700 billion averted "the end of our economic system... as we know it"

What really happened in September 2008, when an ashen-faced Treasury Secretary and Federal Reserve Board Chairman met in emergency, closed-door meetings with Congress and the Executive Branch?

Why did they demand $700 billion?

And why did literally everyone on both sides of the aisle agree?

It turns out they were merely averting a "$550 billion bank run" and a global economic apocalypse.

On C-SPAN, the chairman of the House Capital Markets Subcommittee, Rep. Paul Kanjorski of Pennsylvania, explains.

Look, I was there when the Secretary [of the Treasury] and the Chairman of the Federal Reserve came in to meet with the members of Congress about what was going on. It was about September 15th.

Here's the facts, and we don't even talk about these things. On Thursday, at about 11:00 in the morning, the Federal Reserve noticed a tremendous draw-down of money market accounts in the United States, to the tune of $550 billion dollars was being drawn out in the matter of an hour or two.

The Treasury opened up its window to help. They pumped a hundred and five billion dollars into the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. 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. If they had not done that, their estimation was that by two o'clock that afternoon, five-and-a-half 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.

Now we talked at that time about what would happen if that happened?

It would have been the end of our economic system and our political system as we know it.

And that's why, when they made the point that we've got to act and do things quickly, we did...

If you don't have a banking system, you don't have an economy.

Worse, Kanjorski asserts we're no better off now than we were before.

Sooner or later, people will realize government's interference in the free market precipitated this crisis (do twisted economic distortions like CRA, Fannie Mae and Freddie Mac ring a bell?). Sooner or later, we'll return to the principles that saved us from the Carter administration's financial devastation.

Let free people decide how to spend their money. It's Adam Smith 101, folks.