Plunge Protection Team

It is feared that the Plunge Protection Team consists of a cabal of central bankers working in secret to arrest any fall in the markets beyond a certain threshold by intervening in the markets. It is also referred to as the "Working Group on Financial Markets", "President's Working Group on Financial Markets" or simply the "Working Group". The central banker's intellectual reasoning behind this behavior is to keep a fall in the markets from escalating and finally creating systemic problems in the financial system.

The group is headed by the Secretary of the Treasury. Other members include Chairman of the Board of Governors of the Federal Reserve, the Chairman of the Securities and Exchange Commission and the Chairman of the Commodity Futures Trading Commission.

The group was created in March 1988. President Ronald Reagan created by executive order the President’s Working Group on Financial Markets. The need for this surfaced after the stock market crash of 1987.

The intentions in the beginning was that the group would be an advisory board to the president and regulators in times of turbulence in the markets. And so it has been giving advice to presidents and regulators during the crisis that have followed since.

But there are also concerns that the Plunge Protection Team is doing more than just advising, but also initiates buying in the markets to shore up prices. Such actions have been dismissed as conspiracy theories.

The secret manipulations of bankers and rich industrialists are nothing new. But it is a ideological problem that it is the U.S. government that is meddling in the capitalist free market. These actions also builds up moral hazzard when there is a notions that there will be propping up, shoring up and bail outs by the central bankers if the markets are starting to go down.

Share this page:

Other words and terminology:

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z