Financial History Issue 132 (Winter 2020) | Page 24

wanted a decision. What should we do?”
The next morning, I was visited by one
of his top advisers, who said impatiently,
“What did you tell him? What did he say
[laughs]?” Nothing happened for a couple
of weeks until I got a call on a Saturday
morning from somebody in the White
House to say that my reappointment was
going to be announced by Reagan that day
on a radio talk show [laughs].
AS ADVISOR TO PRESIDENT OBAMA
Bowmaker: I would like to talk briefly
about your role as Chairman of Presi-
dent Obama’s Economic Recovery Advi-
sory Board. How did that position come
about, and how would you describe that
experience?
MoAF Chairman Richard Sylla interviews Paul Volcker in his office
for the Museum’s oral history project, 2006.
in October 1979 when you announced you
would be targeting bank reserves?
Volcker: I had to pull out all the stops.
On the way over to an IMF meeting, I told
Bill Miller, the Secretary of the Treasury,
and Charlie Schultze, the Chairman of the
Council of Economic Advisers, what I was
intending to do in very general terms. And
so, of course, they reported back to Carter.
The feedback I got was that the president
understood that I had to do something.
He preferred that I do it some other way
that was more traditional, and less strik-
ing, but made it clear he wasn’t going
to say anything. I do know there were
one or two people in the administration,
like Tony Solomon, Undersecretary of the
Treasury, who were supportive of what I
was trying to do when they learned about
it. But there were others telling Carter that
while he should support any discount rate
increase that I wanted to do, he shouldn’t,
on the other hand, be behind any of this
unorthodox policy. I didn’t want to do the
orthodox, though, because it didn’t have
any credibility [laughs].
Bowmaker: You were a Carter appoin-
tee as Chairman of the Federal Reserve.
Did you think President Reagan would
make a change when you were up for
reappointment?
Volcker: In the first couple of years of the
Reagan Administration, the Secretary of
the Treasury at that time, Don Regan, criti-
cized very publicly the Federal Reserve.
And the noises that came out of the White
House always seemed to be, “What does
that guy, Volcker, think he’s doing?” Blah,
blah, blah. I am certain that every time
Reagan did a press conference, his people
advised him to take the opportunity to
criticize the Federal Reserve, but he never
did. That doesn’t mean he was happy with
us all the time, but his instinct was that we
were trying our best to deal with inflation.
I think it was as simple as that. But when
the time came to renew my appointment,
there was speculation about what was
going to happen. And so, I went in to see
the president in the upper reaches of the
White House. It was the only time I saw
him completely alone. I said to him, “Look,
my term is up in two months. There’s a lot
of speculation about it. You’re not ben-
efiting from it, and neither is the Federal
Reserve. If you don’t want to reappoint
me, then fine. If you want to reappoint
me, that’s fine, too. But either way, tell me,
and let’s get this over with.” He didn’t say
much, and that was the end of the meeting
[laughs]. After I left, he called in his staff
and apparently told them, “Hey, Volcker
came over here and said his term is up. He
22    FINANCIAL HISTORY  |  Summer 2018  | www.MoAF.org
Volcker: Initially, I think the president
liked to be pictured with me during his
campaign to show that he was a solid
financial fellow. Then he made me his
informal adviser, and had the idea of set-
ting up the board with me as chairman. I
don’t think he understood—and I should
have known given my experience—that
no informal advisory committee can oper-
ate effectively by having public meetings
that were announced in advance. It was
ridiculous. And while it was a pretty good
group of people on the committee, there
were certain issues, like Social Security,
that we were never going to agree on.
We did get some agreement on financial
sector reform, so there we did have some
influence, but overall it was a frustrating
arrangement with limited value.
Bowmaker: How did you come to be
identified with the Volcker Rule [which
prevented banks from speculating in the
markets, and from operating and investing
in hedge funds and private-equity funds]?
Volcker: I had been the head of the Group
of 30, and we had our reform plan relating
to the financial collapse. It pointed to spec-
ulative trading as a problem and included
something that came very close to being
a full-scale Volcker Rule. I discussed the
proposal with the Obama administration,
but it wasn’t very warmly received by all
his economic advisors [laughs]. To me, the
issue was very simple: When you’re deal-
ing with an institution that is government-
guaranteed, in effect, does it make sense
to allow that institution to go out and do