How close was the financial system to melting down?

http://meganmcardle.theatlantic.com/archives/2008/09/how_close_was_the_financial_sy.php

If the FDIC hadn't stepped in to backstop the runs on the money market funds, it's not crazy to think that we might have seen a massive liquidation of huge portions of the banking system at fire sale prices.  That magnitude--one person I talked to before the bailout gave a wild-sounding estimate of $1 trillion worth of money market fund redemptions in the immediate offing.  With the money market essentially destroyed, the resulting bank liquidations would have been even worse, beyond even the ability of the US Government's borrowing power to pull back.  That would have touched the bank accounts, the investments, and the firms of even the hawkiest of credit hawks--unless you've actually got it buried in your back yard in tin cans, you'd lose something, and even then, who would buy whatever it is you sell to make a living?

Consider that the Great Depression came upon a society much less dependent on unsecured credit than we are.  Then count your lucky stars that our financial officials are moderately competent.

How likely was this doomsday scenario?  No way to know.  But it was possible.  That's quite scary enough.