On the day the electronic run on the money markets happened, September 18th, the Dow Jones Industrial Average closed at 11,019.69. This was roughly two weeks before the huge market collapse during the first week of October 2008. As an aside, I wonder how many members of Congress got cashed out their stocks that day?

Let me remind you of what happened that week.

At the end of Sunday, September 14th, BofA agreed to take over Merrill Lynch and Lehman Brothers was left to fail, which they did on Monday September 15th.

The markets lost heavily on Monday and Tuesday, and on Wednesday September 17th the two remaining investment banks, Morgan Stanley and Goldman Sachs, lost 25% and 15% respectively. They also started losing valuable clients, who moved their brokerage accounts to the likes of JP Morgan, which had a retail side and less leverage. Shortly thereafter MS and GS announced plans to merge with retail banks. The independent investment banks were no more.

On Thursday the 18th this alleged bank run happened. What we did know happened was that Paulson hit the PanicButton™ and announced his economic stimulus. It was clearly a rush job and it made very little sense. You can read Krugman's blog entries from that day on to see how ill-conceived the plan was.

On Friday the 19th the FT led with the headline "Markets Roar in Approval" and a picture of Paulson extending his arm across the page. Quite impressive. The rally lasted until the weekend and all the gains were lost over the followig week of Congressional bickering.

I had always thought Paulson had announced his stimulus plan to save his former company, GS. Maybe he had other motivations.