THE 75-MINUTE MARKET RESCUE
Writen by John Crudele
TRUMPETS were blar ing when the Plunge Protection Team came to the rescue of the stock market in the final hour yesterday.
It was something right out of an old John Ford western.
OK, I can't really prove that Treasury Secretary Hank Paulson directed the PPT - formally known as the President's Working Group on Financial Markets - to bail out the stock market.
But how else do you explain how the Dow Jones industrial average could be down a nerve wracking 800 points just 75 minutes before the close of trading and end with a loss of "just" 369 points?
Huh! Explain that to me.
There were no major news events to cause the turnaround. Nothing from Paulson, or the White House, or the Federal Reserve - although people are still hoping for another wrongheaded interest-rate cut from Fed Chairman Ben Bernanke.
And does anyone really believe the nonsense spewed on television about how investors - beaten into submission all day long - suddenly rose from the dead and saw a buying opportunity? These "bottom fishers" were supposed to be willing to load up on stocks even though there is a good possibility that the panic selling will continue overnight in Europe. Doesn't make sense.
When the hair-raising day was complete the Dow was just under the psychologically important support level of 10,000, closing at 9,955.50.
It's a miracle!
Let me explain to you about the Plunge Protection Team, aka The President's Working Group.
Its role has always been nebulous, although it is the perfect organization to direct operations to rescue a falling stock market.
At the same time the government was giving birth to the PPT, Robert Heller was departing as governor of the Fed. Soon afterwards Heller proposed in a speech that was later published in The Wall Street Journal that the Fed be allowed to rig the stock market in times of crisis through the purchase of stock index futures contracts. (Go look it up if you don't believe me.)
They were better, he argued, than the Fed flooding the financial system with money and creating inflation havoc - exactly what Bernanke has been doing.
I'm not even saying it was wrong for the government to intervene in the stock market. So why not yesterday at precisely 2:45 p.m. when stocks were crashing?
But the more important topic for today is this: why has Wall Street turned on the bailout plan that Congress worked so hard on?
But the answer is simple: the plan is a stupid attempt at a trickle-down rescue.
Feeling relieved, financial institutions are now supposed to start lending money and the benefits of the bailout will trickle down to regular folks.
Ain't gonna happen quick enough, for a lot of reasons. Washington should have just chucked a lot of money into banks and told them to start lending.
