The Phaserl


How a Few Men on Wall Street End Up Setting National Economic and Monetary Policy

by Michael Snyder, Economic Policy Journal:

I have already posted that I met on Friday evening with Pippa Malmgren. Her father, Harold, worked under four presidents. She has under two, Ronald Reagan and George W. Bush. She was also a member of the President’s Working Group on Financial Markets, aka, the Plunge Protection Team.

We talked of many things when we met and as I left I told her I had enough material from her for months of posts. I will be posting much here at EPJ and also, in Monday’s EPJ Daily Alert, I will report on her views on the future of interest rates and price inflation.

In this post, I want to focus on one of the most important things we discussed, how Wall Street ends up influencing top Washington D.C. officials and, therefore, policy.

It started when I questioned her about the Plunge Protection Team. “Tell me, what are they up to and do they really manipulate markets?” I asked.

She laughed and said, ” I don’t know why all the focus is on them. They are mostly middle managers, who don’t understand economics or the markets.

“It’s a large group and they have trouble getting out a statement, never mind directing policy.”

She took a sip of her white wine, but I didn’t interrupt. I could tell she wanted to say more.

“But there is a much smaller group. That group is very powerful and they do make policy decisions. It is called the Plus One,” she continued.

“It’s composed of roughly 10 people. The heads of the SEC, the Federal Reserve, the Treasury, the CFTC and the National Economic Council. The actual agency heads who attend a given meeting may vary a bit depending on the crisis, but these five agencies are the core.

“It is just the heads of these agencies and each head is allowed to bring one additional person along. That’s where the name for the group, Plus One, comes from. When I was at the National Economic Council, I was the plus one,” she said.

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