Top Trump official calls bankers, ‘Plunge Protection Team’

Steven Mnuchin, U.S. Treasury secretary, speaks to members of the media outside the White House in Washington, D.C., U.S., on Monday, Dec. 3, 2018. Mnuchin said he's hopeful the temporary trade-war truce that President Donald Trump and China's Xi Jinping agreed to Saturday will lead to real changes in China's economic policies. Photographer: Andrew Harrer/Bloomberg

Reuters: WASHINGTON – U.S. President Donald Trump’s Treasury secretary called top U.S. bankers on Sunday amid an ongoing rout on Wall Street and made plans to convene a group of officials known as the “Plunge Protection Team.”

U.S. stocks have fallen sharply in recent weeks on concerns over slowing economic growth, with the S&P 500 index, .SPX, on pace for its biggest percentage decline in December since the Great Depression.

“Today I convened individual calls with the CEOs of the nation’s six largest banks,” Treasury Secretary Steven Mnuchin said on Twitter shortly before financial markets were due to open in Asia.

“The CEOs confirmed that they have ample liquidity available for lending,” the Treasury said. more …

Opinion: The problem, Virginia, is that no one had considered that there even was a liquidity problem until Secretary Mnuchin said those 11 words, forever to be called the ‘Mnuchin Massacre‘.

Similarly, on October 3, Fed Chair Jerome Powell said 7 words that started the debacle: ‘rates are a long way from neutral’ putting fear in institutions that the Fed was ending the market rally with significantly higher interest rates.

Enter the president who always like to have the last (9) word: “The only problem in the economy is the Fed.”

If everyone would quiet down, panic would be averted and the reality of a full employment economy might put some reason back into the markets (unless there is a financial boogeyman that is yet to come out of hiding).

Mnuchin called in the Plunge Protection team:

Our post January 15, 2016: “The plunge protection team (PPT) was created to shore up markets. To buy when everyone is selling and vise versa.

The team consists of the Secretary of the Treasury, the Chairman of the Board of Governors of the Federal Reserve, the Chairman of the SEC and the Chairman of the Commodity Futures Trading Commission.”

So why is there a need for the PPT? Because the Federal Reserve has a habit of lowering interest rates too much in recessions and tightening too much in expansion. An efficient capitalist market has no need for Ivy League PhDs tinkering with monetary policy, but that is what we have and politicians and investors had better get used to it.

Wouldn’t it be interesting to have a market crash because of a word crisis?