John Crudele: The Treasury's missing minutes mystery

By John Crudele
New York Post
Thursday, November 29, 2007

http://www.nypost.com/seven/11292007/business/the_treasurys_missing_minu...

After a year and a half of stalling, the US Treasury finally complied with the Post's requests for information about The President's Working Group on Financial Markets -- by delivering 177 pages of crap.

In essence, the Treasury's freedom-of-information officials said that the working group -- affectionately nicknamed the Plunge Protection Team -- doesn't keep records of its meetings.

How interesting and convenient!

Included in the 177 pages that the Treasury said responded to our request on the actions of the President's Working Group were 53 pages on which something was redacted -- blacked out so that the discussion was unreadable.

Many of those 53 pages contained no words at all -- just a big black blob.

Starting in June of 2006 the Post asked for an accounting of the actions of the President's Working Group, which was formed under President Reagan. The group seems to have the ill-defined task of keeping an eye on the financial markets. We also asked for e-mails related to our request through the Freedom of Information Act (FOIA).

The working group operates out of the Treasury Department and includes the heads of the various exchanges in the US, as well as top-ranking government officials.

Hank Paulson, the treasury secretary, and Ben Bernanke, the head of the Federal Reserve, are the two most prominent members.

Back in August, Paulson said in a television interview that "we've reenergized the President's Working Group on Financial Markets."

The Wall Street Journal last year said that Paulson, upon becoming Treasury Secretary, was insisting that the Working Group meet every six weeks.

Whatever the schedule of meetings, one of those meetings occurred on Aug. 17 -- the day the Federal Reserve surprised the financial markets with a cut in its discount rate.

According to records that someone else got from Bernanke's office through a FOIA request, there was an 11 a.m. conference call on Aug. 17 of the "PWG" -- the President's Working Group.

Fed Governor Kevin Warsh and Patrick Parkinson, a Treasury staffer, took part in that call, according to Bernanke's phone log.

The day before -- Aug. 16 -- Bernanke and Paulson had lunch, but it isn't clear whether this was just two guys having a meal or if it too was related to the President's Working Group.

Hours after that lunch, word got around on Wall Street that the Fed was about to make a move and the stock market staged a tremendous rally.

The next day those rumors of Fed action proved accurate.

So what's the working group up to?

I suspect the group is ready to come to the rescue of the financial markets -- even equities -- in the case of a meltdown.

And as I've said in the past, that would be a completely acceptable task as long as it remains a limited power that is used infrequently.

But who decides when a rescue is needed?

And if no records are kept, who is held accountable if the working group's power is abused?

George Stephanopoulos, a former top aide to President Clinton, tried to calm fears right after the terrorist attack in 2001 by explaining that the president's working group was at the ready to prop up the stock market.

I too had a similar conversation with a Fed official in September 2001.

But the chance of abusing this presidential mandate -- even for personal gain -- is great whenever an organization operates in secrecy.

And that's exactly how the working group is operating.

Included in the pile of manure we received from Treasury this week is an internal e-mail dated April 9, 2007, that Heidilynne Schultheiss, director of the Treasury's Office of Financial Market Policy, sent to six people.

The subject "Minutes of PWG Meetings?"

"Hi, All. We received a FOIA request asking for minutes of meetings of the President's Working Group on Financial Markets (PWG). As far as we know, minutes are not (and never have been) kept. ... A search of our records turned up nothing," Schultheiss wrote.

That same day someone at Treasury named Mary Kertz e-mailed a bunch of folks "re: meeting notes from last PWG meeting on Financial Markets."

The e-mail said: "Thanks. Just spoke with Norman -- he said the Fed Chairman had said he believed minutes were recorded for these meetings. Strange."

I don't know who Norman is. But I agree that having a powerful organization like this meet in secret is very, very strange.

And extremely dangerous.

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John Crudele is business columnist for the New York Post.

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