The 5 biggest Wall Street conspiracies

By The Big Money

Once there was a simpler time, when pretty much everything that happened in the financial world had a straightforward explanation.

Take the stock market crash of Oct. 19, 1987. In one day, the market lost more than one-fifth of its value. Back then there was considerable speculation about what had caused the market to decline as much and as fast as it did. Something that most people never had heard of -- before or since -- called "program trading" was widely blamed, and curbs were put in place.

But soon the nation moved on, the market rebounded, and the issue faded. Discussion of the causes of the crash was confined to presidential commissions and academics.

Today, of course, the market crash of 1987 seems like a happy interlude in comparison with the recent nightmare. With greater fear, reminiscent almost of the Red Scare of the 1950s, we're seeing a rash of conspiracy theories.

It's not surprising, really. In his 1963 book of essays, "The Paranoid Style in American Politics," Richard Hofstadter marveled at the extent to which paranoia had become an accepted part of the political dialogue. So it seems natural that paranoia has crept into the dialogue about the financial system as well.

As in all fields of conspiracy theorizing, there are two broad species of Wall Street conspiracy theories:

• Alternate history. One must not accept what they want you to believe. It's far too easy, for example, to accept what they want you to think about Sept. 11, the Holocaust and the JFK assassination. The truth they don't want you to know, according to these theories, is that the collapse of the World Trade Center was a controlled demolition, that the Holocaust didn't happen and that Lee Harvey Oswald was a patsy.
• Hidden factors. Something is really happening, and it's all being hushed up. That includes Area 51, the Trilateral Commission and a Masonic conspiracy.

But it's not cut and dried. Maybe the CIA's agents didn't kill President John F. Kennedy, but other outlandish-sounding stories about the CIA turned out to be true. Time -- sometimes a long time -- can demolish or substantiate conspiracy theories.

So here's a field guide to the five most prevalent Wall Street conspiracy theories, with each one graded on scope, durability, crowd appeal and plausibility, and each graded on a sliding scale from 1 to 5, with 1 being "fuhgeddaboudit" and 5 being "damn right."

1. The Plunge Protection Team manipulates the markets

This is a classic conspiracy theory because it is grounded in fact. Yes, there really is a Plunge Protection Team, though it doesn't go by that name. As revealed in a much-quoted Washington Post article from February 1997, the president's Working Group on Financial Markets is poised to intervene in the event of a market calamity. "Plunge Protection Team" was coined by the Post, and it stuck.

The article spawned a spasm of conspiracy theories that grind on to the current day, holding that the government actually does secretly intervene in the markets, buying equity index futures or, as Rep. Ron Paul, R-Texas, recently asserted, has sought to depress the price of gold. But most of the braying about the PPT has been based on snippets of comments by public officials, and the actual evidence has been pretty much absent.

Category: Hidden factor

Scope: 4

Durability: 4

Crowd appeal: 3

Plausibility: 1

2. Wall Street screws consumers at the gas pumps

Wall Street speculation that drives up prices rarely gets the public too stirred up -- if the prices belong to stocks they've bought. But speculation that drives up the price of gasoline, heating oil, broiler chickens and other commodities has consumers ready to march down from Trinity Church carrying pitchforks.

So it was with the oil price spike of 2008. Surely there was a hidden hand there, no? After all, how was it that oil prices suddenly climbed? Didn't make sense. Had to be nasty people on Wall Street doing that.

Video: Capping off a 'decade from hell'

Well, guess what? That's exactly what happened. The Commodity Futures Trading Commission found that speculators had driven up the price of oil. So here's a clear-cut example of how traders sitting behind terminals actually did screw ordinary people on the proverbial Main Street. That wasn't their intent, but that's what they did.

Category: Hidden factor

Scope: 5

Durability: 3

Crowd appeal: 5

Plausibility: 5

Continued: Goldman Sachs is a giant vampire squid

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