Drawdown on 9-18-2008 = $550B

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HerefordSire

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The truth comes out.....finally.


On Thursday (Sept 18), at 11 in the morning the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S., to the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped a $105 billion in 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.

If they had not done that, their estimation was that by 2pm that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed... It would have been the end of our economic system and our political system as we know it...

We are no better off today than we were 3 months ago because we have a decrease in the equity positions of banks because other assets are going sour by the moment.

http://seekingalpha.com/article/119619- ... er-18-2008
 

MO_cows

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Somehow this "news" story just doesn't add up.

$550 billion was drawn out of the banks?? And then what, buried in the back yards of large, expensive homes?? No, more like people were simply transferring their money around more than usual, probably trying to avoid losses. It came out of one place but went into another.

The feds shut down the banking system to stop the withdrawals?? Anybody else out there notice this major disruption in the banking system? I sure didn't.

I just can't believe something like this could escape the attention of the mainstream media. If this report were entirely true and accurate, it would have been all over the news.

It's possible somebody might be trying to scare the daylights out of people for their own sick pleasure, to advance their career, for their 15 minutes of fame, or whatever.
 
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HerefordSire

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You have a healthy way of interpreting things. I try to be the same way.

I have limited understanding of what exactly happened so I will provide a simple point of view of what could have happened. During the Great Depression, I viewed many photos of people standing outside of banks wanting to withdraw their money. People lost confidence in the banking system. There was no such thing as FDIC insured deposits. If a bank became insolvent, the people that did not withdraw their money, likely lost their money. The slang name for this is a "bank run".

With the advent of electronic deposits and wires in recent times, and also the prior establishment of FDIC backing, people have allot more confidence in the banking system. However, according to the article, money markets (short term debt obligations) were being run and not all money market accounts are eligible for FDIC insurance. Even if they were eligible for FDIC insurance, the insurable amount was capped at $100K per account. For an entity to store $1B in cash, it would be extremely difficult to manage because there would be a database of accounts. I remember reading close to this date that at least one, and maybe more than one, money market fund NAV (net asset value) was less than $1.00 per share. This is probably a direct result of the electronic money market run. I have never heard of a money market fund falling below $1.00 NAV per share, until recently.

The money was electronically transferred from an American based institution to a non-American based institution (outside the geography of the USA). In other words, the digits were transferred out of the jurisdiction of the Federal Reserve. Someone like Barclay's bank could have started transfers, for example. They are loaded as well as some other English, German, Japanese, and Chinese institutions. They could have easily transferred many trillions of digits outside of our domain in a short period of time. There has been a major disruption in the financial system since around this date. Banks don't trust other banks because they don't know what is on their books. It is very secretive. Noone is going to advertise they are holding a bunch of financial derivatives worth 10% or what they paid because of being highly leveraged in a downward spriraling market, such as real estate traunches orginating on the west coast.
 

MO_cows

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So, being cynical and world-weary is healthy? That's good to know. :lol:

My grandmother told me many times how during the Depression, they only got cents on the dollar for their money that was in the bank.
 
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HerefordSire

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MO_cows":5q96n2kw said:
So, being cynical and world-weary is healthy? That's good to know. :lol:

My grandmother told me many times how during the Depression, they only got cents on the dollar for their money that was in the bank.

What is the old saying? Believe half of what you see and nothing you read?
 

TexasBred

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MO_cows":x8x14zsz said:
So, being cynical and world-weary is healthy? That's good to know. :lol:

My grandmother told me many times how during the Depression, they only got cents on the dollar for their money that was in the bank.

Banking has changed a lot....in today's banking world trillions can change hands in a matter of seconds.
 
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