Financial safety

Opinion: The Federal Reserve has lost control of the financial markets

After the stock market crash of 1987, President Ronald Reagan created the President’s Working Group on Financial Markets to recommend solutions for enhancing U.S. financial markets, preventing significant volatility and maintaining investor confidence. The group consisted of the secretary of the Treasury and the chairmen of the Federal Reserve, the Securities and Exchange Commission, and the Commodity Futures Trading Commission.

This “working group” became known as the Plunge Protection Team, and many believed the team would intervene at the appropriate moments to prevent significant volatility in the markets, which would, thereby, prevent market crashes in the future. As the myth has been perpetuated, it can supposedly do this by convincing banks to buy stock index futures, or by having the Federal Reserve do the buying. The goal was supposedly to allow markets to correct in an “orderly” fashion so as to “maintain investor confidence” in our equity markets.