Behold: The Federal Reserve's First Plunge Protection Team
By now everyone knows (even though as recently as several years ago it was a taboo "conspiracy theory") that the Plunge Protection Team is nothing but the traders located on the 9th floor of the New York Fed at 33 Liberty street, which transact either unilterally (because it is within their mandate) when buying (never selling) fixed income securities, or via Citadel when it comes to selling VIX or buying index futures to ramp the market at just the right time and break any bearish momentum. Sadly, with great central planning responsbility comes a great media black out, and no photographers are allowed to see Simon Potter, Kevin Henry et alin action before their Bloomberg terminals and trading turrets.
However, back in the day, when the fate of the global economy wasn't spoon fed to the population as being (erroneously) equivalent to every uptick (and rarely downtick) in the rigged, manipulated market, the Fed had fewer inhibitions about demonstrating its trading desk to the public.
Which is perhaps why the NY Fed has been kind enough to just release a pic of the NY Fed's "Open Market Operations" team - i.e., its last line of defense tasked with preserving the American way of life - as it was first seen in the heat of World War II, some time in 1944. Because when one thinks of the veterans, one must not forget the men and women who quietly held it all together by BTFD.
In the years following World War I, the Federal Reserve Bank of New York began to realize the power of open market operations when purchasing a large number of government securities in the hope it would prevent a recession, and found that the action had a large-scale effect on the financial system. New York Fed president Benjamin Strong hoped to use these operations to show that the monetary system could support a multiple expansion of deposits and credit.
During the December 19, 1923 meeting of the Federal Reserve Board, President Strong submitted a statement on open market operations that explained how the New York Fed’s open market policy was affecting the economy. “The volume of open-market holdings with which the reserve banks entered the year 1923 put them in possession of an admirable instrument for testing the degree of dependence of the credit structure upon Federal Reserve bank accommodation.” As a consequence of these new actions taken by the Federal Reserve Bank of New York, the Open Market Investment Committee (OMIC) was formed in early 1923 with the hopes of having the Fed’s two methods of extending credit (rediscount and open market operations) “brought into harmony.”
Today, the New York Fed conducts temporary and permanent open market operations to implement monetary policy. Securities purchased through these operations are managed in a portfolio known as the System Open Market Account and are lent on a daily basis through the securities lending program.
Behold: the first Plunge Protection Team. Note the pencil sharpener in the foreground.
(PHOTO: Open Market Trading Room, 1944. Federal Reserve Bank of New York, all rights reserved. No use without prior permission.)
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