For the past two days, America has been shaken by photos and video reports of angry customers lined up to withdraw their money from branch offices of the failed IndyMac bank. Such images would not have been seen during America’s last great financial disaster.

Comb the microfilm records of newspapers in 1931 and 1932, when depositor panics closed most of the banks in the United States, and you will not find a picture of terrified depositors lining up in hopes of extricating their life savings. Their absence stemmed from editors’ fear that the publicity would intensify the panic. Today, editors exercise no such restraint–and with the Internet, who needs editors?

Media images of panicked Americans may have depressed Federal Reserve Chairman Ben Bernanke. But more depressing, after his repeated efforts, including the throat-slitting of Bear Stearns, must be knowing that he has failed.

Stockholders in banks and kindred financial institutions are in such a panic state, they cannot get rid of their investments fast enough. But as they dump their holdings, the price tanks faster than they sell. In the space of a year, Citigroup, once considered America’s largest bank and now the world’s largest mess, has seen the price of a share of its stock fall from almost $53 to less than $14. Most of that happened before Treasury Secretary Henry Paulson popped up in front of a replica of the Liberty Bell on a Sunday afternoon to announce his plan to save, bolster, prop up, rescue, bail out or pick-your-verb Fannie Mae and Freddie Mac.

In the years before Paulson’s plan, Bernanke had moved hell and high water to stop the implacable slide of real estate prices, but he has not been able to do it. He loaned money, he pumped money, he swapped money for unsellable bonds. In every imaginable way he forced money into the imploding system, and to no avail; the price of real estate keeps dropping.

Full Story: http://www.thenation.com/doc/20080721/howl2