Paul Volcker, R.I.P.

Inflation's worst enemy, the man who clipped the
inflation bat's wings, Paul Volcker, the creator
of the "Volcker Rule" which prohibits banks from
conducting certain investment activities with their
own accounts and limits their dealings with hedge
funds and private equity funds, and restored at least
some measure of respect for the U.S. system of
government during his time as the Chairman of
the Federal Reserve, died after a lengthy illness
at the age of 92.

Politically a moderate Democrat, Volcker was
nominated by President Jimmy Carter to the post
which he would hold throughout Democrat and
Republican administrations, Volcker broke the
stranglehold of inflation which was poisoning the
national economy by pushing interest rates up to
20%, making him at the time much despised but
getting strong results, resulting in his becoming
one of the most successful Fed Chairmen in the
history of the Federal Reserve.

After four years at the New York Federal Reserve
Bank, Volcker became the head of the Fed. When he
took office the country was suffering with an economy
with the highest sustained high inflation ever recorded.
Constricting the monetary supply (hence the incredibly
high interest rates), Volcker finally saw the results
of his gambit when the inflation rate sunk to 3% by the
end of his first four-year term as the Fed's leader.
President Carter praised Volcker for his work and his
performance as the Fed Chairman upon learning of
his passing: "Paul was as stubborn as he was tall
(Volcker was a tall drink of water at 6 foot 7 inches),
and although some of his policies as Fed chairman
were politically costly, they were the right thing to
do." President Ronald Reagan would nominate him
for a second term, after which Volcker retired in
1987. Alan Greenspan then succeeded Volcker
at the head of the Fed.

Volcker then became a proponent of breaking up
large banks and banning commercial banks from
engaging in higher-risk activities, such as proprietary
trading so as to quash speculative trading. Although
he was also a proponent of certain regulations to ensure
protection against any future crisis, he was in favor of
only prudent regulations to guard against speculation,
not regulation which would hamper regular banking
business or the economy.

Even in retirement, Volcker kept working for ethical
banking practices; in the 1990s, he headed up a commit-
tee investigating long-dormant bank accounts and other
assets having belonged to Holocaust victims. A decade
later Volcker headed another committee which helped
establish global accounting practices. In 2004 Volcker
was hired by the UN to research possible corruption in
the Iraqi Oil for Food Program. Despite his politics,
Paul Volcker was not hesitant to speak critically and
openly about the actions of liberals in business
(especially banking) and government, playing no favorites.

Rest in Peace, Mr. Volcker. Your legacy and impact will
be felt for generations to come.


MEM