Plunge Protection Team (PPT): Definition and How It Works

Overview

The “Plunge Protection Team” (PPT) is the informal name for the President’s Working Group on Financial Markets. Created after the 1987 stock market crash, its official role is to advise the president and recommend steps to enhance the integrity, efficiency, orderliness, and competitiveness of U.S. financial markets and to help maintain investor confidence.

Composition and mandate

The working group is chaired by the Secretary of the Treasury and includes senior officials from major financial regulators, typically:
* Chair of the Federal Reserve Board (or a designee)
* Chair of the Securities and Exchange Commission (or a designee)
* Chair of the Commodity Futures Trading Commission (or a designee)

The group reports directly and privately to the president. It is an advisory body rather than a market operator under its public mandate.

History and notable actions

• Established by executive order in March 1988 in response to the October 1987 market crash (Black Monday).
• Has met periodically since—often during times of market stress—to analyze market functioning and recommend policy or regulatory changes.
• Notable activity:
• 1999: Recommended regulatory changes related to derivatives markets.
• 2008: Convened during the global financial crisis.
• December 24, 2018: Held a teleconference chaired by the Treasury Secretary amid sharp market declines that month.

The informal nickname “Plunge Protection Team” was popularized by the financial press.

How the PPT might work (and why it’s controversial)

Officially, the group analyzes market conditions and provides recommendations to the president and regulators. Because the PPT meets privately and does not publish detailed minutes, critics and some market observers have speculated that the group—or government agencies acting with private banks—might take direct market actions to stem declines, such as supporting prices through purchases of futures or other instruments.

Arguments cited by skeptics include:
* Historical precedent of private consortia and bankers intervening in past panics to buy stocks.
* Public statements by officials decades ago (for example, comments suggesting the Fed could support the market via index futures purchases).
* Episodes of aggressive, large-scale buying around sharp drops (e.g., February 2018 and December 2018) that some interpret as coordinated intervention.

However, there is no public, verifiable evidence that the PPT itself directly executes trades on markets. Its formal mandate is advisory, and any market interventions by government entities would involve other agencies and legal constraints.

Criticisms and concerns

• Lack of transparency: meetings and recommendations are not routinely published, which fuels suspicion.
• Potential conflicts: coordination among top regulators and private firms could raise concerns about market fairness if intervention occurred.
• Public trust: secrecy and the perception of backstopping markets can undermine confidence in free and open markets.

What investors should know

• The PPT is primarily an advisory body; its official function is to monitor market stability and recommend policy responses.
• Persistent secrecy means questions about the scope of informal actions will likely continue.
• Regardless of any government backstops, markets remain subject to volatility and risk—investors should focus on diversification, long-term planning, and risk management rather than expecting guaranteed government support.

Key takeaways

• The Plunge Protection Team is the informal name for the President’s Working Group on Financial Markets, created after the 1987 crash to advise on market stability.
• It is composed of top U.S. financial regulators and reports privately to the president.
• Its advisory role has prompted speculation about direct market intervention, but public evidence of the PPT executing trades is lacking.
• Transparency concerns persist, so investors should plan for market risk rather than assume official support during downturns.