Bush’s speech

Paul K. writes:

I watched President Bush’s speech tonight and I’ll tell you my reaction: I immediately drove to an ATM and withdrew $400. It was 10 PM but I was worried there might be a line of people trying to get some money before the coming “bank holiday.” Two weeks ago I had a distinct feeling I should buy some gold and I didn’t follow up, so I’ve decided not to ignore that little voice from now on.

I don’t know what sort of confidence Capt. Edward Smith managed to project as he assured passengers on the Titanic that things were under control, but I would expect he did better than Bush addressing the nation on the economy. The president looked panicked. Furthermore, it struck me as extremely unwise to suggest that if his bailout plan is not passed, we face certain disaster.

They say that every presidency can be summed up in one sentence, and I think it has finally sunk into the “What, me worry?” president that his sentence will be: “He started an unpopular war and presided over the greatest economic debacle since the Great Depression.”

BTW, let me applaud your readiness to voice your concerns about Palin and to defend Obama when he is unfairly attacked. Your intellectual integrity sets you apart from the hacks elsewhere on the net. (And I say that even though I don’t always agree with you.)

LA to Paul K.:

Thank you.

Bush said nothing in his speech about a bank holiday. What do you mean when you talk of a run on banks in order to withdraw cash?

Paul K. replies:

Bush threatened dire consequences if his $700-million bailout is not passed within a few days, among them the failure of local banks. Of course, he quickly assured us that our deposits are covered by the FDIC, but anyone who gives it a moment’s thought understands that the FDIC cannot cover idespread bank failure. The fact is, the effect of Bush’s speech is to create unease, as he is probably not going to get what he wants.

If people think their local bank will fail, it would prudent of them to withdraw their money, or at least enough to tide them over between the bank failure and the restoration of their funds. (After all, they’re not getting much interest anyway.) If enough people do the same, banks will want be forced to set limits on the amount of cash that depositors can withdraw, much as the do at ATMs now. This might create a panic. After that, who knows? Perhaps the government will have to declare a bank holiday, as FDR did in 1933. FDR’s was four days, the next one may be of longer duration; after all, then we were still a major creditor nation, whereas now we are the world’s greatest creditor.

Anyway, these are just my instinctive reactions. I hope they are excessively pessimistic.

Posted by Lawrence Auster at September 24, 2008 11:35 PM | Send