International News from World: Paul Volcker, who as chairman of the Federal Reserve under Presidents Jimmy Carter and Ronald Reagan helped tame inflation with 22% interest rates that also crunched American manufacturing, farming and real estate but led the way to two decades of expansion, has died. He was 92.
He died Sunday at 5 p.m. ET at his home in New York, according to the Volcker Alliance, a nonpartisan, nonprofit organization he founded in 2013 — when he was age 86 — to promote public service.
“Paul A. Volcker was a giant among American public servants,” Alliance President Thomas W. Ross said in a statement Monday. “He was a man of great courage and integrity who committed most of his working life to the public good. He believed in the importance of an effective government to our democracy. He cared deeply about the future of America and those who serve in our government.”
“Paul Volcker was an inspiration to me and to everyone in the Federal Reserve,” said Janet Yellen, Fed chair under Presidents Barack Obama and Donald Trump. “He embodied the values we hold most dear: devotion to public service, the courage to do the right thing, even when it’s immensely unpopular, a commitment to strong and effective regulation of the banking system and the highest ethical standards. We have Paul Volcker to thank for taming inflation and ushering in a long period of macroeconomic stability.”
Years after the Great Recession, Volcker headed Obama’s Economic Recovery Advisory Board and pushed to create a namesake regulation, the Volcker rule, which sought to rein in commercial banks by prohibiting them from making the risky investments that helped spark the 2007 financial crisis.
The cigar-smoking Volcker, who stood 6 feet, 7 inches and was known as “Tall Paul,” became Fed chairman under Carter in August 1979, was renominated by Reagan in 1983 and served until 1987. Even before his 1979 nomination, he had a reputation as an inflation buster.
“In terms of economic stability in the future, that [inflation] is what is likely to give us the most problems and create the biggest recession,” Volcker said in a 1979 Federal Open Markets Committee meeting months before he became the central bank’s chairman.
The inflation rate was 1% under President Lyndon Johnson in 1965 but ballooned to a breakneck 14.8% in March 1980. To combat the price rises, Volcker’s Fed jacked up the federal funds rate and tightened the money supply. The rate, used by banks and credit unions for overnight loans to other depository institutions, reached a record 22.36% in July 1981. (By comparison, it was zero to 0.25% from December 2008 to December 2015, during the financial crisis and its aftermath.) Shortly after becoming Fed chairman, Volcker raised the discount rate by 0.5%, which would be considered a sizable jolt today.