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Goldman accused of stock manipulation during Corzine''s chairmanship
Working group has not met
to discuss markets, U.S. says
By Arshad Mohammed
WASHINGTON, July 16 (Reuters) -- The U.S.
government has not convened its top-level
working group on the financial markets to
discuss the slide in U.S. stocks and does not
try to manage the market's daily moves, the
White House said on Tuesday.
quot;They have not met with particular reference
to stock market activity because we don't try
to manage stock markets' daily movements,quot;
White House spokesman Ari Fleischer said of
the President's Working Group on Financial
Markets. The group, which includes
representatives from the U.S. Treasury, the
Securities and Exchange Commission, the
Federal Reserve Board and the Commodity
Futures Trading Commission, was created after
the 1987 stock market crash to promote close
cooperation among key agencies at times of
There were rumors in European markets on
Tuesday that the group might have met to
discuss the U.S. stocks slide.
Fleischer told Reuters there had been staff-
level contacts among the group to discuss
ways to improve corporate governance and
protect employee pensions, something U.S.
President George W. Bush had asked them to
study in January, but that the heads of the
agencies making up the group had not met
The group typically meets when the markets
are disorderly and there are concerns they
may cease to function properly, but it can
also meet in calmer times to address complex
issues facing the financial markets.
The group issued a statement after the Sept.
11 attacks and it was particularly active
during the Asian financial crisis.
The Bush administration's decision not to
convene the group, unofficially nicknamed the
Plunge Protection Committee, may reflect a
view that the recent declines in the stock
market to its lowest levels since 1997 are
not of that order. The stock market has
fallen steadily over the last week because of
a crisis of confidence in corporate America
after accounting scandals at companies like
Enron Corp., which has caused investors to
doubt earnings reported by many companies.
However, the market has not suffered any
dramatic one-day plunges like its 508-point
loss in the quot;Black Mondayquot; crash on Oct. 19,
1987 or its 554.26-point nosedive on Oct. 27,
1997, sparked by the Asian financial crisis.
The Dow Jones industrial average, which has
fallen roughly 7 percent over the last week,
was down about 165 points, or nearly 1.9
percent, at 8,474 at 4 p.m. EDT on Tuesday.
There was market talk in Europe on Tuesday --
dismissed by many players -- that the U.S.
government may have tried to orchestrate
Monday's stunning recovery on Wall Street by
urging institutions to buy or by buying
itself. Stocks on Monday made their steepest
plunge of the year and then rallied nearly
400 points for the Dow industrials to close
down only 45.34 points at 8639.19.
A stock trader for a major investment bank on
the Chicago Mercantile Exchange said the
sharp rebound from deep declines on Monday
was driven by institutional buying after
stocks hit critical technical levels -- not
by any market manipulation.
When the Dow Jones industrials breached its
Sept. 21 lows and touched 8,244.87 with stock
futures pointing to a 7,900 level, orders
from investment banks Merrill Lynch, Goldman
Sachs, and Lehman Bros., and others flooded
in, traders said. quot;We were absolutely dead
quiet going into the September bottom. It was
kind of eerie on the floor. This was not
suspicious, only savvy,quot; one futures trader
Buyers knew that traders who had sold
contracts quot;shortquot; betting on further stock
declines would have to start buying to cover
their positions. Sure enough, the impact was
quot;It almost was like a gun that went off. When
that Dow level was touched and held, buyers
came racing in,quot; he said.
The New York Fed called key market players in
recent days to gauge what the market needed
to hear from Federal Reserve Chairman Alan
Greenspan in his testimony to the Senate
Banking Committee on Tuesday to soothe
investors, market sources said. One hedge
fund adviser suggested this might have
sparked the rumors of government
The New York Fed declined comment but said
that as part of its role monitoring markets
it speaks to participants daily on market