Paul Volcker

Paul Volckerwas an American economist and banker who, as chairman of the board of governors of the U.S. Federal Reserve System (1979–87), played a key role in the economic program of President Ronald Reagan (1981–89), which became known as Reaganomics, and in stabilizing the American economy during the 1980s.

Volcker graduated from Princeton University in 1949 and received an M.A. from Harvard University in 1951. He worked as an economist for the Federal Reserve Bank of New York (1953–57) and for Chase Manhattan Bank (1957–61), was a deputy undersecretary in the Department of the Treasury (1963–65), and was a vice president of Chase Manhattan Bank (1965–68). As undersecretary for monetary affairs in the Treasury Department from 1969 to 1974, Volcker was the chief architect of the United States’ abandonment of the gold standard and the devaluations of the U.S. dollar in 1971 and 1973.

Volcker served as president of the Federal Reserve Bank of New York from 1975 to 1979, and in 1979 U.S. Pres. Jimmy Carter appointed him to head the Federal Reserve System at a time when inflation in the United States had reached a high of almost 13 percent. Volcker was determined to end chronic high inflation, and under his leadership the Federal Reserve slowed the rapid growth of the money supply and allowed interest rates to rise. These policies caused the most severe recession (1982–83) in the United States since the Great Depression, but inflation was brought firmly under control and thenceforth remained low. Volcker was reappointed to a second four-year term in 1983 and continued his widely praised performance as manager of the money supply and controller of inflation. He declined to accept reappointment to a third term in 1987.

Volcker taught economics at several universities, including Princeton, and he worked as an investment banker. In 2000 he was named chairman of the trustees for the International Accounting Standards Board. In 2002 he was retained by accounting firm Arthur Andersen to chair an independent oversight board that would focus on the firm’s auditing procedures. The appointment was made when federal investigations examined Andersen’s role in the collapse of energy company Enron Corp.

In 2004 Volcker was assigned to head an investigation into alleged corruption in the United Nations Oil-for-Food Program, which had allowed Iraq to sell oil on the world market in order to finance the purchase of infrastructure, food, and medicine (the program was terminated with the start of the Iraq War in 2003). In 2006 Volcker became chairman of the board of trustees of the Group of Thirty (G-30), a private nonprofit group of academics and financiers dedicated to enhancing the understanding of international financial, economic, and policy issues.

In November 2008 U.S. President-elect Barack Obama selected Volcker to chair his Economic Recovery Advisory Board, a new White House panel established in response to the global financial crisis that had begun that autumn. The board’s purpose was to advise the president on methods for stabilizing financial markets and creating jobs. Volcker, who officially assumed the post in 2009, pushed for tougher financial regulations as a means of avoiding future crises. His proposed changes, which collectively became known as the Volcker rule, restricted banks from engaging in proprietary trading and limited the size of their private equity and hedge fund investments. Although his proposals initially met with little support within the administration, President Obama eventually backed the Volcker rule, which was incorporated into the financial reform legislation that was passed in 2010. In January 2011 Volcker announced that he would be stepping down as head of the Economic Recovery Advisory Board.

In 2013 he founded the Volcker Alliance, a nonprofit organization focused on improving the government. He cowrote several books, including the autobiography Keeping at It: The Quest for Sound Money and Good Government (2018).