Danny Schechter - ColdType

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a former Working Group staff member. The Working Group’s
main goal, officials explained, would be to keep the markets
operating in the event of a sudden, stomach-churning plunge
in stock prices – and to prevent a panicky run on banks, brokerage
firms and mutual funds. Officials worry that if investors
all tried to head for the exit at the same time, there wouldn’t
be enough room – or in financial terms, liquidity – for them
all to get through. In that event, the smoothly running global
financial machine would begin to lock up.
The officials said this sort of liquidity crisis could imperil
even healthy financial institutions that are temporarily short
of cash or tradable assets such as US Treasury securities.
John Crudele, of the New York Post, reports a former member
of the Federal Reserve Board, Robert Heller, revealed the
Plunge Protection Team’s (PPT) modus operandi. Heller said
that disasters could be mitigated by “buying market averages
in the futures market, thus stabilizing the market as a
whole.”
I know I am in over my head here since the dynamics of markets,
much less market manipulation, is like a foreign country
I have never visited. There are criticisms of this suggestion of
government manipulation – namely it would be too expensive,
and if it became known, it would undermine the credibility of
the market system. While this debated by financial bloggers
and their readers, the theories keep coming.
Robert McHugh, Ph.D., has provided a description of how
it works which seems consistent with the comments of Robert
Heller. McHugh lays it out like this in an article:
The PPT decides markets need intervention, a decline needs
to be stopped, or the risks associated with political events
that could be perceived by markets as highly negative and
cause a decline; need to be prevented by a rally already in
flight. To get that rally, the PPT’s key component – the Fed
– lends money to surrogates who will take that fresh elec-