Paul Volcker, the former chairman of the Federal Reserve known for his battles against inflation in the late 1970s and early 1980s, has died. He was 92.
The Volcker Alliance, a government advocacy group for which Volcker was the chairman, confirmed his death.
Volcker served as Fed chairman from August 1979 through 1987. He returned to public service more than 20 years later in the wake of the financial crisis, serving as an economic adviser to President Barack Obama during the early days of his administration.
“Paul A. Volcker was a giant among American public servants. He was a man of great courage and integrity who committed most of his working life to the public good,” said Thomas Ross, president of the Volcker Alliance.
Volcker became chairman of the Federal Reserve in August 1979, appointed by President Jimmy Carter, as the United States was in the grip of high inflation. Prices were up 11.8% from the prior year during his first month on the job.
To choke off demand for goods and put downward pressure on prices, the Fed under Volcker raised interest rates to unprecedented levels. By the high point in July 1981, the effective Fed funds rate had reached 22.36%.
But the high rates also plunged the nation into a series of recessions, one starting in January 1980, the next in July 1981. It helped lead to Carter’s loss of his 1980 reelection bid. Unemployment hit a high of 10.8% in late 1982, the highest rate since the Great Depression and a higher rate than the one that was reached during the Great Recession of 2007 through 2009.
But his battle against inflation was successful. The annual rate of price increases had fallen to 1.2% by late 1986, soon before he left office. And except for a brief period in 1990, overall inflation hasn’t topped 6% since he left office.
During his time working with the Obama administration, he helped to draft what became known as the “Volcker Rule” which limited the trading that banks could do with their own proprietary accounts.
At a January 2010 press conference, Obama announced his support for the Volcker Rule, saying new reforms should ban proprietary trading. Volcker was reportedly surprised to discover Obama had given the ban his name.
The Volcker Rule passed as a part of the Dodd-Frank bill of Wall Street reforms, but remains one of the most contested measures by banks and Republicans. Volcker had vigorously defended it. But the limits were loosened on smaller banks in 2018 under a bipartisan bill signed by President Donald Trump. There were further changes put in place by Federal regulators in August 2019.
Volcker has been active in public affairs until recently. He was one of four former Fed chairmen, along with Alan Greenspan, Ben Bernanke and Janet Yellen, who wrote in an op-ed column in the Wall Street Journal in August criticizing the attacks by President Trump on current Fed Chairman Jerome Powell. They argued that an erosion of the central bank’s independence would undermine financial markets and damage the economy.
He is survived by his wife Anke Dening, his children Janice Volcker Zima and James Paul Volcker, and by his grandchildren.