Plunge Protection Team

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The working group of the President to the financial markets (President's Working Group on Financial Markets, commonly known as the Plunge Protection Team , about group for protection against stock market falls, briefly PPT) was determined by Executive Order established 12,631 and that on 18 March 1988 by the President of the United States of America , Ronald Reagan , signed.

The working group was formed in response to the events in the financial markets around Black Monday , October 19, 1987. It should develop recommended solutions for such crises in the financial markets. These solutions should improve the integrity, efficiency, order, and competitiveness of American financial markets and maintain investor confidence.

The working group created by Executive Order 12631 consists of:

Plunge Protection Team

a 1999 report by the PPT

The term Plunge Protection Team originally appeared on the headline of a February 23, 1997 Washington Post article and has been the slang term for the working group in the media ever since. Initially, the term was used to express the opinion that the working group served to stabilize the markets in the event of price falls.

Financial market commentators for UK newspapers, The Observer and The Daily Telegraph , as well as Congressman and multiple presidential nominee Ron Paul and writers Kevin Phillips (who claims to have no first hand information) and John Crudele accused the group of exceeding their legal powers to have. Charles Biderman, head of TrimTabs Investment Research, a company that studies capital flows in the financial markets, suspected that the American government or the FED had made support purchases in the stock markets after the financial market crisis of 2008 . He said if the money to support stock prices didn't come from traditional market participants, then it must come from elsewhere. "Why shouldn't the stock market be stabilized either?" Other officials have also recommended that the government keep stock prices stable.

Critics accuse the group of being a sophisticated mechanism to manipulate the stock markets through support purchases in financial crises. For this, the government should use capital to targeted stocks or stock index - futures buying. Both are prohibited under American law. Other authors refer to these allegations as conspiracy theories. Sprott Asset Management released a report in August 2005 after there was no doubt that the Plunge Protection Team was intervening in the financial markets. However, such articles are published more often in an attempt to convince the banks to buy equity index futures by means of such appeals .

The former board member of the FED, Robert Heller, took the view in the Wall Street Journal that the FED should, instead of flooding the economy with money and thereby increasing the risk of inflation, buy more targeted stock index futures and thus stabilize the market as a whole. This statement became the basis of allegations that the FED acted in exactly the same way. Established analysts in turn called these allegations conspiracy theories, they were too simple and baseless. Author Kevin Phillips wrote in his book Bad Money , published in 2008, that he had no interest in becoming a conspiracy investigator. However, he concluded that some high-level decisions had been made in Washington to put in place a bailout mechanism for the stock market. This should protect important banks in particular from exposure to national and international currency and credit crises. Phillips concludes that the easiest way for the workgroup to intervene in falls by buying stock index futures would be. Either in cooperation with the major banks, or through the FED or the Ministry of Finance.

2007 financial crisis

On October 6, 2008, the working group published a report in which it announced that it had used the opportunities available to it to stabilize the financial markets. There was no mention of buying stocks in the report. The state may own shares in companies to which it has previously granted loans. Because in return for the loans, the state received warrants as collateral.

Individual evidence

  1. ↑ a b Executive Orders
  2. ↑ Plunge Protection Team . In: The Washington Post , February 23, 1997. 
  3. ^ Ambrose Evans-Pritchard: Monday view: Paulson re-activates secretive support team to prevent markets meltdown , Telegraph UK. October 30, 2006. Retrieved September 15, 2008. 
  4. ↑ Richard Wachman, Jamie Doward Observer: Fed to prop up Wall St , Guardian Unlimited. September 16, 2001. Retrieved September 15, 2008. 
  5. ↑ Board. D. Fromson: Plunge Protection Team , Washington Post. February 23, 1997. Retrieved September 15, 2008. 
  6. ↑ Carolyn Baum: Rubin Should Teach Paulson Secret PPT Handshake , Bloomberg. July 31, 2007. Retrieved September 15, 2008. 
  7. ^ Daniel Gross: Riches to Rags . In: The New York Times , August 3, 2008. 
  8. ^ Drake Bennett: The Operators Behind a seductive Wall Street conspiracy theory , The Boston Globe. September 21, 2008. 
  9. ↑ Julie Crawshaw: Biderman: Fed, Gov't Likely Rigging Market Rally , Money News. January 10, 2010. Retrieved April 24, 2012. 
  10. ↑ The Visible Hand of Uncle Sam ( Memento of the original from March 31, 2010 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / www.sprott.com
  11. ^ Federal Government Manipulating Equities Market?
  12. ^ Bennett, The Boston Globe .
  13. ^ K. Phillips: Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism . Viking, 2008, ISBN 978-0-670-01907-6 .
  14. ^ Statement by the President's Working Group on Financial Markets . United States Department of the Treasury . Retrieved October 6, 2008.

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