Lined up to pay their dues, Wall Street CEOs met their congressional inquisitors on Capitol Hill, sparking bouts of righteous indignation peppered with cringe moments worthy of The Office.
Pennsylvania Democrat Paul Kanjorski implored the posterboys for an era of high finance gone bad to “please find a way to return that money before you leave town,” referring to hundreds of billions of dollars in taxpayer bailout funds that officials believe were poured into unwarranted bonus payments instead of being used to revive the business of lending to America. At least he said please.
The message was clear. Though they may never have been instructed to lend the funds when they got them, that’s what Congress wanted. Bankers need to get back to the business of lending. That’s what they were being bailed out for. Never mind that the business of lending, conducted with adequate credit checks, was not what they were doing before, and that prudence in a period of high inflation would preclude much new lending today.
Kanjorski, chairman of the House subcommittee on capital markets and insurance, is himself the subject of a telling tale of befuddlement making its way around the Internet. In an interview on C-Span he said money market investors pulled $550 billion from their accounts, prompting the Fed to step in on Sept 15 and stop the panic by closing money market accounts. His estimation was that “$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 looks increasingly like he didn’t have all his facts in presentable, working order. Felix Salmon of Portfolio.com says he can’t find any reporting of money market funds being closed by the government, and neither can we. Andrew Leonard at Slate.com also questions the numbers. Kajorski’s office pointed us to a September New York Post article citing traders as saying money markets were pushed to the wall with $500 billion in sell orders, about a fifth of the entire market, and comments the congressman made at a hearing with then Treasury Secretary Henry Paulson, apparently referencing this report.