Ex-Fed Chair Paul Volcker, Tamer of Double-Digit Inflation, Dies

December 9, 2019 by Dan McCue
Ex-Fed Chair Paul Volcker, Tamer of Double-Digit Inflation, Dies

WASHINGTON – Paul Volcker, the Federal Reserve chairman who in the early 1980s pushed interest rates to historic highs to rein in runaway double-digit inflation and set the economy on a course to renewed growth, died on Monday.

He was 92.

Volcker, a New Jersey native, was nominated by President Jimmy Carter to be Fed chairman in July 1979, and took charge a month later.

At the time, inflation was rampant: Over the course of 1979, consumer prices jumped 13% and would rise another 13% the following year.


Tasked with bringing the economy under control Volcker raised the Fed’s benchmark interest rate from 11% to a record 20% in late 1980.

The high interest rates eventually cooled the overheated economy, pushing it into a deep recession lasting 18 months.The unemployment rate climbed to 10.8% in November 1982.

Volcker, a towering man standing 6-foot-7, was vilified for the hardships at the time, but his actions were ultimately seen as saving the U.S. from an even worse economic calamity.

Once the recession ended, Volcker began lowering interest rates and soon the economy rebounded

In fact, the new prosperity was behind one of the most famous campaign ads of the modern era,  President Ronald Reagan’s declaration in 1984 that it was “Morning in America” again.

Volcker left the Fed in 1987, succeeded by Alan Greenspan.  But his victory over inflation was credited with ushering in the “Great Moderation” — more than two decades of steady growth, low unemployment and modest price increases.

The period ended with the Great Recession of 2007-2009.


The episode, and Volcker’s unwillingness to cave in the face of loud and persistent criticism, asserted the Fed’s independence from political and public interference.

Volcker, who loved to smoke cheap cigars and was well-known for his perpetually rumpled appearance, spent most of his career in the public sector — at the Treasury Department, the Federal Reserve Bank of New York and the Fed board in Washington.

When not working for the public, he held high-paying positions on Wall Street, starting with an early job at Chase Manhattan Bank.

After his stint as Fed chairman, he served as chair of Wolfensohn & Co., an investment firm, from 1988 to 1996.

After the financial crisis of 2008, President Barack Obama recruited Volcker as an economic adviser.

In that role, Volcker pressed for restrictions on banks’ ability to trade in financial markets with their own money, rather than their clients’, and to invest in private equity and hedge funds.

The regulations, known as the “Volcker Rule,” were included in the Dodd-Frank Wall Street Reform and Consumer Protection Act, and a far-reaching financial overhaul bill Congress passed in 2010.

The rule went into effect on April 1, 2014.

In August 2019, the Office of the Comptroller of the Currency voted to amend the Volcker Rule to clarify what securities trading was and was not allowed by banks.


The change would require five regulatory agencies to sign off before going into effect, but is generally seen as a relaxation of the rule’s previous restriction on banks using their own funds to trade securities.

Volker is survived by his second wife, Anke Dening, and two children.

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