Who Is Paul Volcker?:
Former Federal Reserve Chairman Paul Volcker (1979-1987) was recently appointed as President of Barack Obama's Economic Recovery Advisory Board. The Board will meet monthly, and will give Obama advice on how to revive the economy. Volcker, who is 81, was active in Obama's campaign, and was considered as a possible Treasury Secretary. That position went to Timothy Geithner, Chairman of the Federal Reserve Bank of New York.
Why is Volcker Important to the U.S. Economy?:
Volcker was Chair of the Federal Reserve when the economy was experiencing 10% annual inflation rates. Volcker raised rates to 20% and kept them high until he saw that inflation was in check. Thanks to Volcker, economists and central bankers now realize that managing inflation expectations is even more important that inflation itself. As long as people think prices will keep going higher, they will continue to spend now, and further spurring the economy. When they realize the Fed is committed to aggressive action to stop inflation, they will stop spending.
What Will the Board Do?:
Volcker has blamed the current economic crisis on poor regulation of the financial sector, and he will probably advocate tougher restrictions. He will play a key role in shaping the new board, which will bring in leaders from business and academia to provide an independent perspective on how to handle the crisis. Austan Goolsbee, Obama's chief economics advisor during the campaign and a member of Obama’s Council of Economic Advisers, will be the top staff liaison. The Board is modeled on the President Eisenhower's Foreign Intelligence Advisory Board, which was set up to track Cold War spying activities.
What Has Volcker Done Since Then?:
Volcker is currently the chairman of the Washington, D.C.-based economic advisory body, the Group of 30. After leaving the Fed, Volcker was chairman of J. Rothschild, Wolfensohn & Company, an investment banking firm. He has led investigations into the Enron scandals and corruption in the United Nations’ oil-for-food program in Iraq. He recently headed a panel that probed Swiss banks’ handling of Holocaust victim’s accounts and has been active in the Arthritis Foundation.
Volcker's Education and Background:
Mr. Volcker was born on September 1927 in Cape May, New Jersey. He earned a B.A. from Princeton in 1949, and an M.A. in political economy and government from the Harvard University Graduate School of Public Administration in 1951. From 1951 to 1952, he was Rotary Foundation Fellow at the London School of Economics.
Volcker started as a research assistant at the New York Fed in 1949 and 1950, and returned as an economist between 1952 and 1957, when he became an economist at Chase Manhattan Bank. He joined the Treasury Department in 1962, as Director of the Office of Financial Analysis, and was appointed Deputy Undersecretary for Monetary Affairs in 1963. In 1965, he went back to Chase Manhattan as vice president of Forward Planning.
From 1969 to 1974, he was Undersecretary of the Treasury for Monetary Affairs. He then became senior fellow at the Woodrow Wilson School of Public and International Affairs at Princeton University for the 1974-75 academic year. In 1979, he became Chairman of the Federal Reserve.
