Paul Volcker — the 6-foot-7, cigar-chomping economist who quashed inflation as Federal Reserve chairman in the 1980s with a controversial, tough-medicine approach — died Sunday after being treated last year for prostate cancer. He was 92.
Better known to younger Fed watchers for his “Volcker Rule,” which restricted banks from investing for their own bottom lines after the 2008 financial crisis, Volcker helped shape American monetary policy in his decades-long career under Democratic and Republican presidents.
“Paul was as stubborn as he was tall,” President Jimmy Carter, who tapped Volcker to lead the US central bank in 1979, said in a statement on Monday. “And although some of his policies as Fed chairman were politically costly, they were the right thing to do.”
Faced with the task of taming runaway inflation under Carter, Volcker imposed steep interest rate increases that triggered a recession.
The rate hikes initially sparked public outrage — struggling home builders mailed the Fed bricks and wooden planks, and debt-laden farmers blockaded the bank’s Washington headquarters with tractors. But Volcker stood his ground, inflation backed off, and the economy recovered well enough to help President Ronald Reagan win a landslide 1984 re-election victory.
Volcker’s tough stand not only set the stage for a multi-decade economic boom across the US, it boosted the Fed’s status as an independent entity that was capable of making tough decisions in the face of opposition from the White House and Congress.
But while Alan Greenspan, who succeeded Volcker in 1987, kept an eye on inflation, he largely ignored Volcker’s warnings as he allowed the national debt to expand and loosened regulations on Wall Street.
The famously austere Volcker, who smoked drugstore cigars and favored cheap suits, was born in New Jersey and educated at Princeton, Harvard and the London School of Economics. He began his government career in 1952 as an economist at the Federal Reserve Bank of New York, which he would go on to lead.
After stints at Chase Manhattan Bank, Volcker became the US Treasury’s undersecretary for monetary affairs and played a key role in ending the dollar’s convertibility to gold under President Richard Nixon in 1971. He called the decision “the most significant single event” of his career.
After leaving the Fed in 1987, Volcker helped investigate the Swiss bank accounts of Holocaust victims and alleged corruption in a United Nations aid program. In the late aughts, President Barack Obama tapped him to clean up the mess from the financial crisis.
Serving as chair of Obama’s Economic Recovery Advisory Board, Volcker quipped that he hadn’t seen a worthwhile financial innovation since the ATM. The Volcker Rule, which prevented banks from trading with their own money, was included in sweeping financial reforms that Congress passed in 2010.
Having long resisted calls for a memoir, Volcker finally published one in October 2018 called “Keeping at It: The Quest for Sound Money and Good Government.” Volcker said he wrote the book to call attention to a lack of qualified and committed public servants in the US government.
“One of my old friends from abroad once told me — I think he meant it as an ironic compliment — that he thought of my career as a long saga of trying to make the decline of the United States in the world respectable and orderly,” Volcker said.
With Post wires