Dear John: Why the hell didn’t that Plunge Protection Team stop the markets from plunging 50 percent or so between 2007-2009? Can’t they put a stop to selling at, say, a 20 percent loss or so? Damn! J.B.
Dear J.B.: Who said the Plunge Protection Team didn’t intervene to stop the market slide during the start of the Great Recession?
In fact, the research I conducted showed that the Treasury Secretary Hank Paulson was very actively calling Wall Street leaders during the market panic in the beginning of what came to be called the Great Recession and — suddenly — the market rallied.
I have a log of some of those phone calls to prove it.
The Plunge Protection Team (PPT), for those of you who missed the first column, is officially known as The President’s Working Group on Financial Markets and was started in 1988. It got the PPT nickname from those of us who think the group has more than just an advisory role and that it actually intervenes in crashing markets.
But to your point: If the government stops trading — as it did during the terror attacks in 2001 — then selling pressure builds up for when the market reopens. You just end up with a bigger crash.
The better move is to somehow surreptitiously bring buyers into the market so that ordinary investors are led to believe that market psychology has changed and “it’s a good time to buy.” I don’t know who those buyers were during the rallies in the 2007-09 time frame, but the action was suspicious.
How do I feel about the government intervening in the stock market? I have mixed feelings. If it’s used only in an utter emergency and kept quiet, I’m OK with it. But knowing that the government may have your back also helps create bubbles that aren’t good for investors.
Dear John: The Federal Reserve is raising rates to try to screw President Trump. How many times did they raise it when Obama was in office? M.P.
Dear M.P.: I think that’s ridiculous.
But the answer to your question is twice — once in December 2015 and again one year later, in December 2016.
Trump had already been elected president at the time of that second rate hike. There have now been a total of eight rate increases from the Fed.
These last few have been under the orders of Fed chairman Jerome Powell, whom Trump appointed earlier this year. The other hikes were under Janet Yellen, who served out her term quietly under Trump until last year.
The Fed is raising interest rates because they’ve been too low for too long and are creating bubbles that are likely to pop and cause a ton of trouble.
The Fed is also giving Trump a big gift: If and when these bubbles pop, the president has a perfect scapegoat to blame. And he’s already setting Powell up for the fall.
Say what you want about our president — and people have said a lot — he is incredibly cunning.
