The Crash of '87: 'Incredibly' High Prices Caused Market Plunge, Panel's Chief Says
WASHINGTON -- The head of the presidential task force investigating the October stock market crash said that the market plunged essentially because it was too high.</br></br>In his first wide-ranging interview since being named to lead the task force, investment banker and former senator Nicholas F. Brady, discussing the causes of the crash, said that "the stock market was incredibly high, by all the standards that we measure it by. When values get exaggerated, any number of things can make it rearrange itself." Thus, he said, "I think everything that's been mentioned (as a cause) played a role."</br></br>Mr. Brady, the co-head of Dillon, Read & Co., emphasized that the five members of the commission haven't yet come to any conclusions. "We haven't started to argue among ourselves about what we think," he said.</br></br>But Mr. Brady did indicate what his views are on several subjects, including portfolio insurance, leverage in the markets, and possible manipulation of the market during the turbulence of Oct. 19 and 20. He also discussed the methodology of the task force's study.</br></br>Mr. Brady suggested indirectly that he wouldn't support limiting the use of the computerized hedging strategy known as portfolio insurance. When asked about portfolio insurance, he said: "We have a tendency in this country to fix things that are about to right themselves. If that (portfolio insurance) was a problem -- and I don't know that it was -- the market may take care of it."