Paul Volcker | |
|---|---|
_am_19._Symposium_1989-HSGH_022-000765_(cropped)_(2).jpg) Volcker in 1989 | |
| Chair of thePresident's Economic Recovery Advisory Board | |
| In office February 6, 2009 – February 6, 2011 | |
| President | Barack Obama |
| Preceded by | Position established |
| Succeeded by | Jeffrey R. Immelt(Council on Jobs and Competitiveness) |
| 12thChairman of the Federal Reserve | |
| In office August 6, 1979 – August 11, 1987 | |
| President | Jimmy Carter Ronald Reagan |
| Deputy | Frederick H. Schultz Preston Martin Manuel H. Johnson |
| Preceded by | G. William Miller |
| Succeeded by | Alan Greenspan |
| Member of theFederal Reserve Board of Governors | |
| In office August 6, 1979 – August 11, 1987 | |
| President | Jimmy Carter Ronald Reagan |
| Preceded by | William Miller |
| Succeeded by | Alan Greenspan |
| President of the Federal Reserve Bank of New York | |
| In office May 2, 1975 – August 5, 1979 | |
| Preceded by | Alfred Hayes |
| Succeeded by | Anthony M. Solomon |
| Personal details | |
| Born | Paul Adolph Volcker Jr. (1927-09-05)September 5, 1927 Cape May, New Jersey, U.S. |
| Died | December 8, 2019(2019-12-08) (aged 92) New York City, U.S. |
| Party | Democratic[1][2] |
| Spouses | |
| Children | 2 |
| Education | Princeton University (BA) Harvard University (MA) London School of Economics |
Paul Adolph Volcker Jr. (September 5, 1927 – December 8, 2019) was an American economist who served as the 12thchairman of the Federal Reserve from 1979 to 1987. During his tenure as chairman, Volcker was widely credited with having ended the high levels of inflation seen in the United States throughout the 1970s and early 1980s,[3] with measures known as theVolcker shock.[4][5][6] He previously served as thepresident of the Federal Reserve Bank of New York from 1975 to 1979.
PresidentJimmy Carter nominated him to succeedG. William Miller as Fed chairman and PresidentRonald Reagan renominated him once. Volcker did not seek a third term at the Fed and was succeeded byAlan Greenspan. After his retirement from the Board, he chaired theEconomic Recovery Advisory Board under PresidentBarack Obama from 2009 to 2011 during thesubprime mortgage crisis.[7]
Volcker was born inCape May, New Jersey, the son of Alma Louise (née Klippel, 1892–1990) and Paul Adolph Volcker (1889–1960).[8] All his grandparents were ofGerman origin. Volcker grew up inTeaneck, New Jersey, where his father was the township's firstmunicipal manager.[9] Paul Sr. thrived in the role for 20 years as he improved the burgeoning town's economic stability and the local government's effectiveness.[10] Paul Jr. had four older sisters: Ruth (1916–1991), Louise (1918–1966), Elinor (1922–1923) and Virginia Streitfeld (1924–2011). As a child, he attended his mother'sLutheran church, while his father went to anEpiscopal church. Volcker graduated fromTeaneck High School in 1945,[8] where he participated in several student groups and impressed his peers and teachers with his knowledge of politics.[11]
Volcker attendedPrinceton University as an undergraduate student and graduated with highest honors from the Woodrow Wilson School of Public and International Affairs (now thePrinceton School of Public and International Affairs) in 1949. In his senior thesis, titled "The Problems of Federal Reserve Policy sinceWorld War II", Volcker criticized the Federal Reserve's post-WWII policies for failing to curb inflationary pressures, writing, "a swollen money supply presented a grave inflationary threat to the economy. There was a need to bring this money supply under control if the disastrous effects of a sharp price rise were to be avoided."[12][13][14] Following a summer as a research assistant at theFederal Reserve Bank of New York, he moved toHarvard University to earn anM.A. inpolitical economy from itsGraduate School of Arts and Sciences andGraduate School of Public Administration. He worked a second summer as a New York Fed research assistant before graduating in 1951. After Harvard, Volcker attended theLondon School of Economics from 1951 to 1952 as aRotary Foundation Ambassadorial Fellow under Rotary'sAmbassadorial Scholarships program.[15]
In 1952, Volcker joined the staff of theFederal Reserve Bank of New York as a full-time economist. He left that position in 1957 to become a financial economist with theChase Manhattan Bank. In 1962,Robert Roosa, who had been his mentor at the Federal Reserve, hired him at theTreasury Department as director of financial analysis.[16] In 1963, he became deputy under secretary for monetary affairs. He returned to Chase Manhattan Bank as vice president and director of planning in 1965.[17]
Appointed by theNixon Administration, Volcker served under secretary of the Treasury for international monetary affairs from 1969 to 1974. He played an important role in PresidentRichard Nixon'sdecision to suspend gold convertibility of the dollar on August 15, 1971, which resulted in the collapse of theBretton Woods system. Volcker considered the suspension ofgold convertibility "the single most important event of his career."[18] Because of his position as under secretary, Volcker served as a board member forOPIC andFannie Mae.[19] Across the policies he worked on, he acted as a moderating influence on policy, advocating the pursuit of an international solution to monetary problems and acting as a negotiator with other nations' policymakers.[20] After leaving the U.S. Treasury, he spent a year as a senior fellow atPrinceton'sWoodrow Wilson School (his alma mater). In 1975, he becamePresident of the Federal Reserve Bank of New York, and he retained that role until he becameFederal Reserve Chairman in August 1979.[17]
AfterG. William Miller's confirmation as Secretary of the Treasury, PresidentJimmy Carter's confirmation of Vice Chairman of the Federal ReserveFrederick H. Schultz's role as Acting Chairman sent markets panicking. Carter resultingly sought a reassuring, qualified nominee who would confront inflation head-on, and nominated Paul Volcker to serve as chairman of theBoard of Governors of the Federal Reserve System on July 25, 1979.[21][22] He was confirmed by the U.S. Senate on August 2, 1979, and took office on August 6, 1979.[23] PresidentRonald Reagan renominated Volcker to a second term in 1983.[24][25]
Inflation emerged as an economic and political challenge in the United States during the 1970s. Themonetary policies of the Federal Reserve board, led by Volcker, were widely credited with curbing the rate of inflation and expectations that inflation would continue. US inflation, which peaked at 14.8 percent in March 1980, fell below 3 percent by 1983.[26][3] The Federal Reserve board led by Volcker raised thefederal funds rate, which had averaged 11.2% in 1979, to a peak of 20% in June 1981. Theprime rate rose to 21.5% in 1981 as well, which helped lead to the1980–1982 recession,[27] in which the nationalunemployment rate rose to over 10%. In addition to the rises in key interest rates, the so-called 'Volcker shock' includedmonetarist-inspired policies, such as targeting themoney supply. Despite the fact that monetarist economists did not recognize Volcker policies to be totally monetarist, some members of theFederal Open Market Committee (FOMC) claimed to follow monetarist principles.[28]
Volcker's Federal Reserve board elicited the strongest political attacks and most widespread protests in the history of the Federal Reserve (unlike any protests experienced since 1922), due to the effects of high interest rates on the construction, farming, and industrial sectors, culminating in indebted farmers driving their tractors onto C Street NW in Washington, D.C. and blockading theEccles Building.[29] Aggrievedhomebuilders mailed the Fed pieces of2x4 lumber in protest.[30] The 'Volcker shock' also entailed strong disturbances within the European Monetary System and has therefore been deeply criticized in Europe.[31]US monetary policy eased in 1982, helping lead to a resumption of economic growth.
In July 1984, Volcker was summoned to a meeting withPresident Reagan and thenWhite House Chief of StaffJames Baker.[32] In the meeting, Baker ordered him not to raise rates in the lead-up to the 1984 presidential election. Volcker wrote in his memoir that he was "stunned," but since he had not intended to raise rates and felt the White House wouldn't publicize it, he did not speak of the meeting to the press.[32]
The US current account was in permanent deficit by the 1990s. Volcker himself tried to remedy the situation by thePlaza Accord in 1986, which called for Germany and Japan to revalue relative to theUS dollar.[33]
The combination of the Fed's tight money policies and the expansivefiscal policy of theReagan Administration (large tax cuts and a major increase inmilitary spending) produced largefederal budget deficits and significant macroeconomic imbalances in theU.S. economy. The combination of growing federal debt and high interest rates led to a substantial rise in federal net interest costs. The sharp rise of interest costs and large deficits ledCongress to take some steps towards fiscal constraint.[34]
Nobel laureateJoseph Stiglitz said about him in an interview:
Paul Volcker, the previous Fed Chairman known for keeping inflation under control, was fired because the Reagan administration didn't believe he was an adequatede-regulator.[35]
This statement by Joseph Stiglitz is technically inaccurate, as the “firing” was simply neither nominating nor appointing Paul Volcker for another term, unlike Ronald Regan’s actual firing of the air traffic controllers.
CongressmanRon Paul, well known as aharsh critic of the Federal Reserve, offered qualified praise of Volcker:
Being in Congress in the late 1970s and early 1980s and serving on theHouse Banking Committee, I met and got to question several Federal Reserve chairmen:Arthur Burns,G. William Miller, and Paul Volcker. Of the three, I had the most interaction with Volcker. He was more personable and smarter than the others, including the more recent board chairmenAlan Greenspan andBen Bernanke.[36]
In 1983, Volcker received the U.S. Senator John Heinz Award for Greatest Public Service by an Elected or Appointed Official, an award given out annually byJefferson Awards.[37]
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After leaving the Federal Reserve in 1987, he became chairman of the prominent New York investment banking firm, Wolfensohn & Co., a corporate advisory and investment firm run byJames D. Wolfensohn (who later becamePresident of the World Bank).[38][39]
In 1992, Volcker was elected to theAmerican Academy of Arts and Sciences.[40]
In 1993 he chaired the Group of 30 Report on the Derivatives market entitled "Derivatives: Practices and Principles"[41] with several appendices and a survey on how practices may have changed since the original 1993 report.[42] The Group of 30 is a "consultative group on international economic and monetary affairs". Volcker was their Chairmanemeritus.[43]
In 1996, he took up the chair of the Independent Committee of Eminent Persons (Volcker Commission) to look into the dormant accounts ofJewish victims of the Holocaust lying inSwiss banks. This included a "massive accounting of Swiss bank records". In the midst of a contentious process (the committee was formed by three Jewish representatives and three representatives of Swiss banks), he was able to bring about an agreement among the parties for a settlement of $1.25 billion.[44]
Volcker was elected to theAmerican Philosophical Society in 1992.[40]
In 2000 he accepted the Chairmanship of the IFRS Trustees, the not-for-profit funding arm of theInternational Accounting Standards Board (later the IFRS Foundation). The IFRS Foundation is a private sector enterprise based in London which seeks to develop a single global accounting model, subject to adoption country by country under their rules of law.[45]
In 2001 Paul Volcker joined The Conference Board, an economic and business think-tank based in NY, as a senior advisor supporting research on corporate governance, analysis of business cylcles and economic policy. His activities there primarily focused on guiding the research staff and engaging global business leaders to support The Conference Board's activities promoting free-markets, economic analysis and responsible corporate governance. Other Federal Reserve Chairs affiliated with The Conference Board include Alan Greenspan, who was a researcher there from 1948 to 1953, when it was known as the National Industrial Conference Board.
In April 2004, the United Nationsassigned Volcker to research possible corruption in the IraqiOil for Food program. In the report summarizing its research, Volcker criticizedKojo Annan, son of then-UN Secretary-GeneralKofi Annan, and the Swiss company Cotecna Inspection SA, Kojo's employer, for trying to conceal their relationship. He concluded in his March 2005, report that "there is no evidence that the selection of Cotecna, in 1998, was subject to improper influence of the Secretary General in the bidding or selection process."[46] While Volcker did not implicate the Secretary General in the selection process, however, he did cast serious doubt on Kofi Annan, whose "management performance ... fell short of the standards that the United Nations Organization should strive to maintain".[47] Volcker was a director of theUnited Nations Association of the United States of America between 2000 and 2004,[48][49] prior to his being appointed to theIndependent Inquiry by Kofi Annan.[50]
As of October 2006, he was the chairman of the board of trustees of the influentialWashington-based financial advisory body, theGroup of Thirty, and a member of theTrilateral Commission. He had a long association with theRockefeller family, not only with his positions at Chase Bank and the Trilateral Commission, but also through membership of the trust committee ofRockefeller Group, Inc., which he joined in 1987. That entity managed, at one time, theRockefeller Center on behalf of the numerous members of theRockefeller family. He was a chairman and an honorary trustee ofInternational House, the cultural exchange residence and program center in New York City. He was a founding member of theTrilateral Commission and a long-time member of theBilderberg Group.[citation needed]
In January 2008, he endorsedDemocratic Party presidential candidateBarack Obama in the upcomingpresidential election.[51]
On April 8, 2008, he was the featured speaker atThe Economic Club of New York. Volcker discussed "what appears to be in substance a direct transfer of mortgage and mortgage-backed securities of questionable pedigree from an investment bank to the Federal Reserve", and offered his detailed analysis and evaluation of interrelationships among the U.S. capital markets, Federal Reserve policies, and the economy as whole.[52]
Paul Volcker appeared in theCharles Ferguson's movieInside Job. He was interviewed about current Wall Street CEO pay, claiming it is "excessive".[53]
Volcker was an economic advisor to President Barack Obama, heading thePresident's Economic Recovery Advisory Board.[54][55][56] Volcker had also been Obama's first pick asUnited States Secretary of the Treasury, but he was considered too old.[57] During the financial crisis, Volcker was extremely critical of banks, saying that their response to the financial crisis was inadequate, and that more regulation of banks is called for.[58][59][60] Specifically, Volcker called for a break-up of the nation's largest banks, prohibiting deposit-taking institutions from engaging in riskier activities such asproprietary trading,private equity, andhedge fund investments (seeVolcker Rule).[61][62] Volcker left the board when its charter expired on February 6, 2011, without being included in discussions on how the board would be reconstituted.[63]
On January 21, 2010, President Barack Obama proposed bank regulations which he dubbed "TheVolcker Rule", in reference to Volcker's aggressive pursuit of these regulations.[64] Volcker appeared with the president at the announcement. The proposed rules would prevent commercial banks from owning and investing in hedge funds and private equity, and limit the trading they do for their own accounts.[65] According to SEC CommissionerLuis A. Aguilar, "[t]he success or failure of the Volcker Rule will depend on the manner in which banking entities comply with the letter and spirit of the rule, and on the willingness of regulators to enforce it."[66]
Volcker was known to defy the stereotype of a Wall Street insider. A profile inThe Week for February 5, 2010, stated that Volcker does not agree with the conventional wisdom that "financial innovation" is necessary for a healthy economy. In fact, he likes to say, "the only useful banking innovation was the invention of theATM."[67]
On April 6, 2010, at theNew-York Historical Society's Global Economic Panel, Volcker commented that the United States should consider adding a national sales tax similar to theValue Added Tax (VAT) imposed in European countries, stating "If, at the end of the day, we need to raise taxes, we should raise taxes."[68]
In 2011, Volcker and former Secretary of StateGeorge Shultz authored an article inThe Wall Street Journal voicing their opinion that thewar on drugs had failed. They did not advocate for the legalization of drugs, but rather for a reexamination of the costs of drug prohibition in the United States.[69]
In 2015, Volcker donated his public service papers toPrinceton University'sSeeley G. Mudd Manuscript Library.[70]
Volcker served as an honorary co-chairman for theWorld Justice Project. The World Justice Project works to lead a global, multi-disciplinary effort to strengthen therule of law for the development of communities of opportunity and equity.[citation needed]
In 2013, Volcker founded the nonprofit organization the Volcker Alliance to address the challenge of effective execution of public policies and to rebuild public trust in government.[71][72] The nonpartisan Alliance works toward that objective by partnering with other organizations—academic, business, governmental, and public interest—to strengthen professional education for public service, conduct needed research on government performance, and improve the efficiency and accountability of governmental organization at the federal, state, and local levels.[73]
Volcker served on the board of directors of theCommittee for a Responsible Federal Budget.[74] The nonpartisan organization is "committed to educating the public on issues with significant fiscal policy impact".[75]
Volcker married Barbara Bahnson, the daughter of a physician, on September 11, 1954. They had two children, Janice, a nurse and a Georgetown University graduate,[76] and James, a research assistant and aNew York University graduate[77] who was born withcerebral palsy. They also had four grandchildren.[78][79][80] His younger sister died young, and two of his three older sisters, Louise and Ruth, never married. His other older sister, Virginia, was married to and divorced from Harold Streitfeld; they have five children.[81]
Volcker was an avidfly-fisherman,[82] who recounted in 1987, "The greatest strategic error of my adult life was to take my wife to Maine on our honeymoon on a fly-fishing trip."[83][84] Volcker was known as "Tall Paul" for his height of 6 feet 7 inches (2.01 m),[85][86] standing exactly a foot (30 cm) taller than his first wife, Barbara, when they first met.[78] She died on June 14, 1998, having suffered from lifelong diabetes, as well as rheumatoid arthritis. Over Thanksgiving, 2009, he became engaged to Anke Dening, a long-time assistant.[87] They married in February 2010.[88]
Volcker died in New York City on December 8, 2019, at age 92. He had reportedly been treated forprostate cancer since being diagnosed the year prior.[89]
Volcker received honorary degrees from several educational institutions, including:Baytown Christian Academy,Hamilton College (1980),University of Notre Dame,Princeton University,Dartmouth College,New York University,University of Delaware,[90]Fairleigh Dickinson University,Bryant College,Adelphi University,Lamar University,Bates College (1989),Fairfield University (1994),York University (2001),Williams College (2003),[91]Northwestern University (2004),Rensselaer Polytechnic Institute (2005),Brown University (2006),Georgetown University (2007),Syracuse University (2008),[92]Queen's University (2009),Amherst College (2011), and at theUniversity of Toronto (2015).[93]
Maxwell School of Citizenship and Public Affairs atSyracuse University, where Volcker served on the advisory board from 2001 until his death, established the "Paul Volcker Chair" inBehavioral economics in 2011.[94][95]
The political rock band Volcker fromPortland, Oregon, formed in early 2015, was named after him.[97] It released an eponymous album on January 27, 2016.[98] The band was featured onBBC Radio 4'sEconomics with Subtitles on August 28, 2016.[99]
In a report last week, the conservative Heritage Foundation contended that Mr. Volcker had a conflict of interest that 'threatens his credibility' as head of the commission because he had not disclosed that he was a director of the United Nations Association of the United States of America, which the report called 'a pro-U.N. advocacy group.'
When Volcker was appointed to head the Oil-for-Food investigation in April 2004, it was not widely known by the public, the world's media, and the U.S. Congress that he was a director of the United Nations Association of the United States of America (UNA-USA) and the Business Council for the United Nations (BCUN). Volcker is listed as a director in the 2003-2004 UNA-USA annual report,[12] as well as in the annual reports for 2001-2002 and 2000-2001.[13]
It is inconceivable that Kofi Annan was unaware of Mr. Volcker's close ties to the United Nations Association when he appointed him to head the Oil-for-Food investigation, and it could well have been an important factor influencing his decision.
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| Other offices | ||
|---|---|---|
| Preceded by | President of the Federal Reserve Bank of New York 1975–1979 | Succeeded by |
| Government offices | ||
| Preceded by | Member of theFederal Reserve Board of Governors 1979–1987 | Succeeded by |
| Chairman of the Federal Reserve 1979–1987 | ||
| Political offices | ||
| New office | Chair of thePresident's Economic Recovery Advisory Board 2009–2011 | Succeeded byas Chair of the Council on Jobs and Competitiveness |
