What the Feds are Afraid of…
28th Sep 2008 posted in General
My colleagues at Time, Karen Tumulty and Massimo Calabresi, have written a story that details what officials are afraid will happen without a bailout. Nicely done.
On Sept. 18, Paulson and Bernanke laid out the dark scenario for stunned-silent congressional leaders: a stock-market crash, businesses going under, unemployment soaring, consumers unable to get so much as a car loan, banks failing so fast that they would quickly drain the federal deposit insurance fund—and with it, countless people’s life savings. And unlike the chain reaction that came over the course of weeks and months in 1929, this one would happen in a matter of days, if not faster.
Now why didn’t Paulson and Bernanke explain this directly to the people who are paying for the bail-out in the very beginning? Because they were worried about a self-fulfilling prophecy? They were afraid millions of people would drain their bank accounts before Congress could pass a rescue plan?
As I mention below, this fear of public hysteria is usually more powerful than the hysteria. And it must be weighed against the need to gain the public’s trust—in order to get said bail-out.
Last I checked, there have been no mobs in the street since the Time story came out. I would be curious to see the ATM receipts in the Capitol, however…