Paul Volcker the man credited to have changed the United States Federal Reserve and beat Inflation in the late 1970s and early 1980s has died at the age of 92.
According to the report by CNN, the Paul Volcker Alliance, a government advocacy group for which Volcker was the chairman, confirmed his death.
Paul Volcker served as Fed chairman from August 1979 through 1987. He returned to public service more than 20 years later in the wake of the financial crisis, serving as an economic adviser to President Barack Obama during the early days of his administration.
“Paul A. Volcker was a giant among American public servants. He was a man of great courage and integrity who committed most of his working life to the public good,” said Thomas Ross, president of the Volcker Alliance.
Volcker became chairman of the Federal Reserve in August 1979, appointed by President Jimmy Carter, as the United States was in the grip of high inflation. Prices were up 11.8% from the prior year during his first month on the job.
The Associated Press in their reporting the of the death of Paul Volcker, also stated that in the early 1980s, Volcker was vilified by the public for having triggered a recession in order to curb runaway price increases. Homebuilders put postage stamps on bricks and on two-by-four wooden planks and mailed them to the Fed to protest how super-high interest rates had wrecked their businesses.
Auto dealers, stuck with lots full of unsold cars, did the same with car keys. Angry farmers, struggling with high debts, drove their tractors to Washington and blockaded the Fed’s headquarters.
In doing so, Volcker implicitly asserted the Fed’s independence from political and public interference. Throughout its history, the Fed has been seen as needing to operate independently in order to properly carry out its key functions of of maximizing employment and stabilizing prices. In the past three years, President Donald Trump has challenged that independence with his frequent attacks on the Fed and his demands that it cut rates more aggressively.
Under Volcker, the pain of the recession he helped cause eventually produced the desired results: Inflation receded. Once it did, Volcker’s Fed began lowering interest rates. And the economy rebounded vigorously enough for President Ronald Reagan to declare the arrival of “Morning in America’’ on his way to a landslide victory in the 1984 presidential election. Volcker left the Fed in 1987, succeeded by Alan Greenspan.
The Volcker-led victory over inflation is widely credited with beginning what economists call the “Great Moderation’’ — more than two decades of mostly steady economic growth, relatively low unemployment and modest price increases. The Great Moderation ended with the Great Recession of 2007-2009.
Volcker had spent most of his career in the public sector — at the Treasury Department, the Federal Reserve Bank of New York and the Fed board in Washington.
A towering 6 foot 7 and perpetually rumpled, Volcker favoured cheap cigars and bad suits. John Connally, a slick Texan who was Volcker’s boss at the Treasury in the early 1970s, once threatened to fire him if he didn’t get a haircut and improve his wardrobe.
After leaving the Fed, Volcker took on assignments as a troubleshooter. He ran a commission to investigate what Swiss banks did with the assets of Holocaust victims during and after World War II. The United Nations assigned him to look into allegations of corruption in a UN program to provide food aid to Iraq.
After the financial crisis of 2008, President Barack Obama recruited him as an economic adviser. Volcker pressed for restrictions on banks’ ability to trade in financial markets with their own money, rather than their clients’, and to invest in private equity and hedge funds.
The regulations, known as the “Volcker Rule,’’ were included in a far-reaching financial overhaul bill Congress passed in 2010.
Volcker had little sympathy for big banks in the wake of the financial crisis, which required a taxpayer bailout of big Wall Street firms. He dismissed claims that deregulated financial institutions deserved credit for coming up with innovative products and services.
The only useful financial innovation he’d seen in years, he said, was the ATM.
He is survived by his wife Anke Dening, his children Janice Volcker Zima and James Paul Volcker, and by his grandchildren.