Update 403 — Paul Volcker in Memoriam
Paul Volcker, Federal Reserve Chairman from 1979 to 1987, advisor to four U.S. presidents, policymaker and public servant par excellence, died on Sunday at 92. He will be remembered best for working to curtail the worst inflation crisis in the nation’s history and for the Volcker Rule, a Dodd-Frank Act regulation limiting risky banking activities.
His post-Fed public service promoting good governance through the Volcker Alliance, receives less but deserves as much attention. The Alliance sidesteps red/blue political lines and promotes fact-based, technocratic solutions to social and political problems. Public policy is a dish best served transparently, accountably and in the interests of people, not special interests, he says. We concur. So today, we look back at the legacy he leaves behind.
Good weekends, all…
Volcker, Inflation Conqueror
Paul Volcker served as the 12th Chairman of the Federal Reserve from August 1979 to August 1987. He is widely credited with bringing down skyrocketing inflation levels and putting the U.S. economy on more stable ground early in his tenure. When President Nixon ended the gold standard in 1973, the dollar tanked in value, import prices rose, and along with it, inflation.
Enter President Carter and his new Fed Chairman, Paul Volcker, who undertook then-extreme measures to meet the national emergency. Through gumption and steadfast commitment to his monetary theories, Volcker cemented himself in history as the Fed Chair who fought inflation and won. Annual inflation peaked at 14.8 percent in March 1980; by 1986, it plateaued at a healthy two percent.
Today, politicians and economists from across the political spectrum celebrate Volcker’s tenure at the Fed, but progress at the time was painful. When Volcker took over at the Fed, unemployment stood at six percent. After his monetary tightening, joblessness peaked at 10.8 percent in 1982. Interest rates surpassed 20 percent, hindering growth.
Volcker was responding to a national crisis as a nonpartisan and public servant. His views on the Fed were steadfast, original, and unpopular — he took that resoluteness into the rest of his life in public service.
Volcker, Public Advocate
Volcker dedicated his post-Fed life to improving the quality of governance. In 2013, he founded the Volcker Alliance, a New York City-based nonpartisan organization dedicated to promoting more effective government management — from the local to federal level. The Alliance partners with educational institutions and business groups to sponsor research of government performance and recommend policy.
Volcker also took a particular interest in financial regulation and systemic risk. In 1987, once inflation was tamped down and the country entered a prolonged period of economic expansion, President Reagan viewed Volcker as an impediment to financial deregulation. Reagan instead chose Alan Greenspan to succeed him as Fed Chair. Throughout the 1990s, Volcker levied harsh criticism of the modern financial industry and the opaque world of derivatives.
In this, Volcker was prescient and re-emerged into the public spotlight after the 2007 financial crisis. President Obama appointed Volcker to be chairman of the Economic Recovery Advisory Board from February 2009 to January 2011. Volcker helped draft the “Volcker Rule,” which limited the types of trading that banks could do with their own proprietary accounts. The Volcker Rule became law as part of the Dodd Frank and Wall Street Reform Act.
A Distinguished Life
Outside of good governance and monetary policy, Volcker’s altruistic approach to public service was evident. He chaired the commission to look into dormant Swiss bank accounts of Jewish victims of the Holocaust, recovering $1.25 billion. He also chaired the independent commission that inquired into the notorious oil-for-food scandal during the second Gulf war.
More than anything, Volcker’s life should be remembered as a life dedicated to public service, with a legacy of independence and intellectual and moral integrity. In an age of demagoguery and cults of personality, he will be remembered as a decent and gifted man who materially advanced the causes of good government and self-government.