For those of you who would have done nothing, listen to the reality…

Partial transcript…

I was there when the secretary and the chairman of the Federal Reserve came those days and talked to members of Congress about what was going on… Here’s the facts. We don’t even talk about these things.

On Thursday, at about 11 o’clock in the morning, the Federal Reserve noticed a tremendous drawdown of money market accounts in the United States to a tune of $550 billion being drawn out in a matter of an hour or two.

The Treasury opened up its window to help. They pumped $105 billion 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 and there. And that’s what actually happened.

If they had not done that their estimation was that by two o’clock that afternoon, $5.5 trillion 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.

For those of you who didn’t realize how dire the situation was (even though I implored you to take it seriously) I hope this video will make it crystal. If our banking system failed and it set off a chain reaction around the world, our credibility would have been TOAST. Because at that point, the worldwide sentiment would have turned against us once and for all and foreign politicians would have been forced to rebuke us. So do you think the dollar would have been the preferred currency after that? Do you think we would have had any leverage if we had absolutely wiped out the world’s wealth in one fell swoop because we didn’t act?

Letting the market work would have literally resulted in almost a complete unravelling of our way of life. Imagine if you had woken up the next day and discovered that your debit card, your credit cards…none of them worked. It would have been catastrophic.

Paulson’s plan was merely a stopgap and it was a poorly executed one as it ended up trying to recapitalize banks in a fairly ineffective way. True, credit did unfreeze, but only for those at the top. But now we have a new administration that’s proposed a plan which focuses not only on banks, but also businesses and consumers. I don’t know if it’ll work, but if we don’t attempt to get the credit flowing to the folks at the bottom again, it’ll be impossible to pull ourselves out of this mess.

And, again, doing nothing is not an option.

(h/t: Balloon Juice)

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