Working Group on Financial Markets

{{Short description|Working group within the US federal government}}

The President's Working Group on Financial Markets, known colloquially as the Plunge Protection Team, or "(PPT)" was created by Executive Order 12631,{{cite web|url=https://www.archives.gov/federal-register/codification/executive-order/12631.html|title=Executive Orders|date=March 18, 1988|publication-date=August 15, 2016| accessdate=August 10, 2018}}, which appears and purports to be a copy of the original: {{cite journal |url= https://www.loc.gov/item/fr053055/ |journal=Federal Register |volume= 53 |issue=55| page= 9421 |title= Executive Order 12631 of March 18 1988: Working Group on Financial Markets |author= National Archives And Records Administration |date=March 18, 1988|publication-date=March 22, 1988|publisher=Library of Congress |accessdate=August 10, 2018 |id=FR Doc. 88-6380}} signed on March 18, 1988, by United States President Ronald Reagan.

As established by the executive order, the Working Group has three purposes and functions:

"(a) Recognizing the goals of enhancing the integrity, efficiency, orderliness, and competitiveness of our Nation's financial markets and maintaining investor confidence, the Working Group shall identify and consider:

:(1) the major issues raised by the numerous studies on the events in the financial markets surrounding October 19, 1987, and any of those recommendations that have the potential to achieve the goals noted above; and

:(2) the actions, including governmental actions under existing laws and regulations (such as policy coordination and contingency planning), that are appropriate to carry out these recommendations.

(b) The Working Group shall consult, as appropriate, with representatives of the various exchanges, clearinghouses, self-regulatory bodies, and with major market participants to determine private sector solutions wherever possible.

(c) The Working Group shall report to the President initially within 60 days (and periodically thereafter) on its progress and, if appropriate, its views on any recommended legislative changes."

The Working Group consists of:

The Secretary of the Treasury, or his or her designee (as Chairperson of the Working Group);
The Chairperson of the Board of Governors of the Federal Reserve System, or his or her designee;
The Chairperson of the Securities and Exchange Commission, or his or her designee; and
The Chairperson of the Commodity Futures Trading Commission, or his or her designee.

Plunge Protection Team

"Plunge Protection Team" was originally the headline for an article in The Washington Post on February 23, 1997,{{cite news | url=https://www.washingtonpost.com/wp-srv/business/longterm/blackm/plunge.htm | newspaper=The Washington Post | date=February 23, 1997 | title=Plunge Protection Team }} and has since been used by some as an informal term to refer to the Working Group.{{cite news|url-access=subscription |url=https://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&amp;amp;amp;grid=&xml=/money/2006/10/30/ccview30.xml|title=Monday view: Paulson re-activates secretive support team to prevent markets meltdown|last=Evans-Pritchard|first=Ambrose|date=October 30, 2006|publisher=Telegraph UK|access-date=September 15, 2008 | location=London}}{{dead link|date=July 2021|bot=medic}}{{cbignore|bot=medic}}{{cite news|url=https://www.theguardian.com/Archive/Article/0,4273,4258005,00.html|title=Fed to prop up Wall St|last=Wachman|first=Richard|author2=Jamie Doward Observer |date=2001-09-16|publisher=Guardian Unlimited|access-date=September 15, 2008 | location=London}} Initially, the term was used to express the opinion that the Working Group was being used to prop up the stock markets during downturns.{{cite news|url=https://www.washingtonpost.com/wp-srv/business/longterm/blackm/plunge.htm|title=Plunge Protection Team |last=Fromson|first=Brett. D.|date=February 23, 1997|newspaper=Washington Post| access-date=September 15, 2008}}{{cite news|url=https://www.bloomberg.com/apps/news?pid=20601039&sid=a87VERwuZP8c&refer=home|title=Rubin Should Teach Paulson Secret PPT Handshake|last=Baum|first=Carolyn|date=July 31, 2007|publisher=Bloomberg|access-date=September 15, 2008}} Financial writers for British newspapers The Observer and The Daily Telegraph, along with U.S. Congressman Ron Paul, writers Kevin Phillips (who claims "no personal firsthand knowledge" {{cite news| url=https://www.nytimes.com/2008/08/03/books/review/Gross-t.html | work=The New York Times | title=Riches to Rags | first=Daniel | last=Gross | date=August 3, 2008}}) and John Crudele,{{cite news |url-access=subscription |url=http://www.boston.com/bostonglobe/ideas/articles/2008/09/21/the_operators/?p1=Well_MostPop_Emailed4|title=The Operators Behind a seductive Wall Street conspiracy theory|last=Bennett |first=Drake|date=September 21, 2008|publisher=The Boston Globe|access-date=September 21, 2008}} have charged the Working Group with going beyond their legal mandate.{{Failed verification |date=August 2018| reason=Source talks of a conspiracy theory and does not appear to make claim about legality}} Charles Biderman, head of TrimTabs Investment Research, which tracks money flow in the equities market, suspected that following the 2008 financial crisis the Federal Reserve or U.S. government was supporting the stock market. He stated that "If the money to boost stock prices did not come from the traditional players, it had to have come from somewhere else" and "Why not support the stock market as well? Moreover, several officials have suggested the government should support stock prices."{{cite news|url=http://www.moneynews.com/StreetTalk/CharlesBiderman-Fed-government-Rigging/2010/01/06/id/345497|title=Biderman: Fed, Gov't Likely Rigging Market Rally|last=Crawshaw |first=Julie|date=2010-01-10|publisher=Money News|access-date=April 24, 2012}}

In August 2005, Sprott Asset Management released a report that argued that there is little doubt that the PPT intervened to protect the stock market.{{cite web|url=http://www.sprott.com/Docs/SpecialReports/08_2005_TheVisibleHand.pdf|title=Sprott Asset Management|access-date=November 13, 2016|archive-date=March 31, 2010|archive-url=https://web.archive.org/web/20100331233751/http://www.sprott.com/Docs/SpecialReports/08_2005_TheVisibleHand.pdf|url-status=dead}} However, these articles usually refer to the Working Group using moral suasion to attempt to convince banks to buy stock index futures.{{Cite web |url=http://registeredrep.com/mag/finance_stock_markets_da/ |title=Federal Government Manipulating Equities Market? |access-date=August 29, 2007 |archive-date=April 19, 2012 |archive-url=https://web.archive.org/web/20120419021204/http://registeredrep.com/mag/finance_stock_markets_da/ |url-status=dead }}

Former Federal Reserve Board member Robert Heller, in the Wall Street Journal, opined that "Instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thereby stabilizing the market as a whole." Author Kevin Phillips wrote in his 2008 book Bad Money that while he had no interest "in becoming a conspiracy investigator", he nevertheless drew the conclusion that "some kind of high-level decision seems to have been reached in Washington to loosely institutionalize a rescue mechanism for the stock market akin to that pursued...to safeguard major U.S. banks from exposure to domestic and foreign loan and currency crises."{{Cite book | last=Phillips | first=K. | year=2008 | title=Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism | publisher=Viking | isbn=978-0-670-01907-6 | url-access=registration | url=https://archive.org/details/badmoneyreckless00phil }} Phillips infers that the simplest way for the Working Group to intervene in market plunges would be through buying stock market index futures contracts, either in cooperation with major banks or through trading desks at the U.S. Treasury or Federal Reserve.

References

External links

File:PWG report on OTC derivatives and CEA.pdf

Published Working Group reports:
[http://www.ustreas.gov/press/releases/reports/hedgfund.pdf Hedge Funds, Leverage, and the Lessons of Long-Term Capital Management] April 1999
[http://www.ustreas.gov/press/releases/reports/otcact.pdf Over-the-Counter Derivatives Markets and the Commodity Exchange Act] November 1999
[http://www.ustreas.gov/offices/domestic-finance/financial-institution/terrorism-insurance/pdf/report.pdf Terrorism Risk Insurance] September 2006
"Plunge Protection Team" claims:
[http://www.nypost.com/seven/10262006/business/treasurys_paulson_plays_with_the_plunge_protectors_business_john_crudele.htm Treasury's Paulson Plays with the Plunge Protectors] by 'John Crudele' in New York Post, October 26, 2006
[http://www.nypost.com/seven/08092007/business/hey__hank__lets_sit_down_and_chat_about_things_business_john_crudele.htm Hey Hank, Let's Sit Down and Chat about Things] by John Crudele, August 9, 2007 New York Post followup to the above article
"Plunge Protection Team" counterclaims:
[http://www.safehaven.com/article-721.htm The Plunge Protection Team], by John Mauldin
[http://registeredrep.com/mag/finance_stock_markets_da/ The Stock Market's Da Vinci Code] {{Webarchive|url=https://web.archive.org/web/20120419021204/http://registeredrep.com/mag/finance_stock_markets_da/ |date=April 19, 2012 }}, by Jonathan Moreland
[http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_baum&sid=aASBFuJ4Nq_U I Am Not Now, and Have Never Been, a PPT Member: Caroline Baum], by C. Baum