- Former Federal Reserve Chairman Paul Volcker has died at age 92.
- Volcker served as Fed chair from 1979 until 1987, helping to rein in persistently high inflation and reset the economy from the 1970s.
- After his time as Fed chair, Volcker continued to serve in various capacities including as a critical adviser to President Barack Obama during the financial crisis.
- Volcker is survived by his wife, two children, and four grandchildren.
- Visit BusinessInsider.com for more stories.
Paul Volcker, the legendary economist who served as the 12th chairman of the US Federal Reserve, died Sunday at the age of 92.
He is survived by his wife, Anke Dening; two children, Janice and James; and four grandchildren.
Volcker was known as a towering Fed chairman – both for his impressive height (he stood 6 feet 7 inches) and also for confronting difficult economic circumstances.
Following his time at the top of the US central bank, Volcker continued to be active in economics and financial regulation, helping to lead President Barack Obama’s response to the 2000s financial crisis.
From staff economist to Federal Reserve chair
Volcker’s career before he became Fed chair alternated between the public and private sectors, with roles as a staff economist at the Federal Reserve Bank of New York, Chase Manhattan Bank, and the Treasury Department during the presidencies of John F. Kennedy, Lyndon B. Johnson, and Richard Nixon.
During his time in the Nixon administration, Volcker served as undersecretary for international affairs. As part of the role, Volcker helped the US move off the gold standard, which redefined the international monetary system.
After leaving the Treasury, Volcker became the president of the New York Fed in 1975 until his selection for Fed chair in 1979.
Confronting economic challenges with the ‘Volcker Shock’
The US was in the midst of a nearly decade-long battle with economic “stagflation” – a period when both inflation and unemployment were persistently high – when President Jimmy Carter nominated Volcker as Fed chair.
Prices were rising by nearly 10% year-over-year. To get inflation under control, Volcker undertook a series of adjustments known as the “Volcker Shock,” in which the Fed tightened the money supply while allowing the market to determine interest rates. The Fed’s funds rate hit a record high, and the US economy got hit hard as a result.
Volcker stared down political pressure from Carter’s successor, President Ronald Reagan, as well as lawmakers from both political parties. Farmers, car dealers, and other business owners protested Volcker’s moves. House Majority Leader James C. Wright Jr. even called for Volcker’s resignation. Sen. Ted Kennedy suggested the Fed be rolled into the Treasury Department.
Despite the pressure, Volcker pushed on.
Eventually, inflation dropped to a more manageable level, unemployment ticked down, and Volcker eased up on the tight money rules. Many economists credit Volcker’s policies as a significant contributor to the end of stagflation.
Reagan reappointed Volcker in 1983, and he served in the role until stepping down in 1987.
Ben Bernanke, another former Fed chairman, told The New York Times that the will to defy political pressure was the epitome of Volcker’s legacy.
“He came to represent independence,” Bernanke told The Times for its obituary of Volcker. “He personified the idea of doing something politically unpopular but economically necessary.”
A strong advocate of financial reform
Even after departing the Fed, Volcker continued as a leading figure in economics and financial reform.
In 1996, Volcker chaired the Independent Committee of Eminent Persons, which became known as the Volcker Commission, to help identify the financial accounts of Holocaust victims held by Swiss banks. The commission found 46,000 accounts in 59 Swiss banks that were most likely opened by Jews who died during the Holocaust.
Volcker was also economic adviser to Obama during his run for president and was eventually appointed to chair Obama’s Economic Recovery Advisory Board following the US banking system’s plunge in 2008. During that time, the former Fed chair became a leading critic of what he saw as banks’ excessive risk-taking and lacklustre response to the crisis.
“Wake up, gentlemen, your response is inadequate,” Volcker told a room full of bankers and investors at a Wall Street Journal conference in 2009.
His best-known contribution from this period was dubbed the Volcker Rule, which barred banks from using their own funds for trading, known as proprietary trading.
Volcker also concerned much of his work with trying to encourage more people to engage in public service, chairing two commissions on public service and speaking extensively about what made good governance and why government should encourage people to engage with the public sector.
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