Posted in Finance, Accounting and Economics Terms, Total Reads: 341
Definition: Plunge Protection Team
Plunge protection team is the nickname given by Washington Post to The Working Group on Financial Markets also known as the President’s Working Group. It was created by the Executive Order 12631, signed by the then US President Ronald Reagan, during the stock market crash of 1987. It consisted of The Chairman of SEC (Securities Exchange Commission), Chairman and board of governors of The Federal Reserve, and the Chairman of the Futures Trading Commission.
The purpose of the group was to maintain the investor’s confidence in the market by overseeing the market and making sure that they remain efficient and competitive. So their task was to prevent the American markets from plunging again.
There were some conspiracy theories that the PPT propped up the markets by buying stocks and stock market futures contracts with tax payer’s money and selling them when the markets stabilized. Since it was a closed group which met informally behind closed doors and hence the decisions taken were hidden from the tax paying public. During the financial crisis of 2008, the President’s Working Group was put to task but it could not prevent the market from crashing 57% which dragged down every industry in the benchmark and around 96% of the stocks.