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John Crudele: The day I met the Plunge Protection Team
By John Crudele
New York Post
Tuesday, June 20, 2006
I swear that this is the truth, the whole truth, and
nothing but: I came face to face with the Plunge
Protection Team and lived to tell about it.
As I explained in my two previous columns on the
Plunge Protection Team (June 8 and June 13), a former
Federal Reserve governor in 1989 proposed that the
U.S. government be allowed to rig the stock market in
case of emergency.
"The stock market is certainly not too big for the Fed
to handle," said Robert Heller, who suggested that the
government secretly buy stock index futures to save
Wall Street and the economy from catastrophe.
Heller's plan hung like a fairy godmother over the
market (in other words, you want to believe but really
can't) until the Washington Post naively wrote about
the Plunge Protection Team in 1997.
The PPT, the Post said, was started in 1987 and had
met secretly until -- at the height of the last stock
market bubble -- dozens of participants suddenly
started spilling the beans. How convenient, no?
My brush with the Plunge Protection Team occurred on
Sept. 18, 2001. Yeah, that day!
You'll remember that the stock market had been closed
for a week because terrorists had attacked the World
I was stuck in New Jersey when I placed a call to a
top financial executive with close ties to the Federal
Reserve and who also happens to have spent much of his
life in public service. Let's call my source Fred.
As I recall, my intention was to ask Fred some lame
question like: "Can the U.S. economy survive this?"
Fred was also stuck somewhere else and couldn't be
reached, so I posed my stupid questions to others as I
pumped out columns that were dutifully upbeat and
patriotic for a week.
I forgot about Fred altogether until he returned my
phone call on Sept. 18, explaining that he had been
stranded out of the country.
By the time Fred had gotten back to me, the stock
market had already opened and prices were sharply
lower even though the Federal Reserve had made a
not-so-surprising reduction in interest rates that
Fred was annoyed, mostly with Treasury Secretary Paul
O'Neill, who, Fred felt, hadn't emphasized the rate
cut enough when addressing the nervous public (and the
financial markets) that morning.
Now I was annoyed, so I blurted out that Fred should
wise up. I can't remember exactly what I said but it
was something like, "Hey, wake up. Nobody cares about
the interest rate cut. Someone has to step in front of
this market and save it."
Then I remember referring Fred to the proposal made in
1989 by Heller.
And when it didn't look like Fred was going to be able
to get a copy of Heller's October 1999 article in The
Wall Street Journal I faxed it over to him. Fred's
secretary never acknowledged receiving the fax, but
she did call me up later in the day to make sure
something Fred had promised me had arrived.
The stock market rallied late in the day on Oct. 18. I
don't know if Fred had anything to do with it or
whether the rally was just spontaneous.
These days, things seem different with Big Mouth Ben
Bernanke now at the helm of the Fed; there's the
possibility of a crisis any day.
Remember, Bernanke once proposed running the printing
press and dropping currency from helicopters as an
economic plan. And lately Bernanke wasn't astute
enough to demur when asked about his concern about
rising prices, probably because he's trying to
overcome his reputation as an inflation slacker.
With a guy like Ben around, it's nice to know that
Fred is too.