On January 27, 2009, Congressman Paul Kanjorski (D-PA 11th District) responded to a caller on C-SPAN , who, struggling to support her family while earning fewer than ten dollars an hour, was questioning the unaccounted recent federal bailouts. She was polite, but angry.
Here’s my transcription of the Congressman’s responses and questions from C-SPAN’s moderator Steve Scully.
Kanjorski: And I understand that frustration, quite frankly I’m equally frustrated as you are, I’m not necessarily in your particular experience or circumstances to be that frustrated but I am frustrated too. But it’s because of the misconceptions out there that things were done that were misunderstood. We did not give the 700 billion dollars for the purpose of, ah, ah, lending the money. That was never in the program. It was, it was misconstrewed initially and put together with the suggestion Secretary Treasury that we would be buying what we called, ah, “dirty assets”, ah, er, defective morgages and securities that were held in these banks that the government would find a way to create a market, buy them in, take them off the balance sheets of the banks that the banks could continue to function normally.
Scully: Did you support that . . . .
Kanjorski: I supported that but also part of the bill we gave the jurisdiction and authority to the secretary treasury to make investments in banks, you see very wide authority because quite frankly we’re not the experts on the hill how as to solve all this problem and the problem is a multi faceted problem so we gave great flexibility to the secretary treasury to act.
Scully: So what would you say then though to somebody who came and said Paul Kanjorski is supporting Wall Street but not Main Street with this latest 825 billion dollar package now being [inaudible] in the House?
Kanjorski: They are right to this extent. Why did we do that? We did that because the Secretary, . . . . . . Look, I was there when the Secretary and the, er, Chairman of the Federal Reserve came those days and talked with members of Congress about what was going on. It was about September 15. Here’s the facts. And we don’t even talk about these things. On Thursday, at about eleven o’clock in the morning the Federal Reserve noticed a tremendous draw down of ah, ah, ah, money market accounts in the United States to the tune of five hundred and fifty billion dollars, was being drawn out in a matter of an hour or two. The Treasury opened up its ah, ah, window to help, they pumped one 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 two hundred and fifty thousand dollars per account so that 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 twenty four hours the world economy would have collapsed.
Now we talked at that time about what would happen if that would happen. 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 that point we’ve got to act and do things quickly we did.
Now Secretary Paulson said let’s buy out these subprime mortgages; that’s what he came to congress, but he said give us latitude and large authority to do as many things as we decide necessary and give us seven hundred billion dollars to do that. Shortly after we enacted our bill with those very broad [inaudible] the UK came out and said, “No, we don’t have enough money to buy toxic assets. We’re instead, we’re going to put our money into banks so that their equity grows and they’re, they’re not bankrupt. ” And so er, er, the UK started that process, and that’s true. It was much cheaper to put more money into banks as equity investments than to start buying their bad assets because it became early determined that we’d probably have to spend three of four trillion dollars of, of, of taxpayers’ money to buy these bad assets. And we didn’t have, we only had seven hundred billion dollars.
So Paulson made a complete switch, went in and started put, putting in money in buying securities and reinvesting in the banks of the United States. Why? Beause if you don’t have a banking system you don’t have an economy. And we, and, and although we did that, it wasn’t enough money and as fast as we did that the economy has been falling and the reason last week we’re really no, no better off today than we were three months ago because we’ve had a decrease in the equity positions of banks because other assets are going sour by the moment.
Now we’ve got to make some decisions. Do we pour more money into what extent that money goes in, I, myself think we ought to take the time, analyze where we are, have the people, understand, when you listen to the lady who just got off the telephone, she is near panic, and she doesn’t think her government is acting properly or acting in her behalf. I think it’s important that we start informing that lady as to what really were the facts, what happened, and get input from her, er, er, maybe she has a better idea. You know we’re not any geniuses in economics or finance on the Hill, we’re representatives of the people. We ought to take our time, but let the people know that this is a, ah, ah, very difficult struggle. Somebody threw us in the middle of the Atlantic Ocean without a life raft and we’re trying to determine what’s the closest shore and whether there’s any chance in the world to swim that far.
Well, there we have it. Five hundred and fifty billion dollars withdrawn from American banks in about two hours. And the panjandrums of Wall Street come running to Washington demanding that unless Congress gives them a mountain of money immediately the entire economy of the world will collapse. Indeed, we were facing the end of our political system “as we know it.”
Guess it wasn’t the little old lady investment clubs in Nebraska that suddenly decided to cash in their chips (and if it wasn’t them, who was it and is anybody trying to find out?). And the collapse of the whole world’s economy happening in twenty-four hours? What? The world’s hens are going to stop laying, the winter wheat won’t sprout, and the Ganges run dry? Hardly.
In my last post , I wrote about how our American calendar demonstrates that it is the pursuit of money that unites us as Americansat least it demonstrates that pretty clearly to me. And I asked “ifor perhaps better, whenwe run out of money, what will keep us together?” Congressman Kanjorski has given me his answer: Panic. We’ve been thrown in the middle of the ocean, with no life raft or shore in site. I can just hear the Lord in Bill Cosby’s famous sketch about the Flood: “Noah, how long can you tread water?”