"I think we'd all be doing a lot better if somebody like you was in there."
–Ron Paul to Paul Volcker
>
Quite the surprising comment from author of the book End the Fed. Its from this article in the FT:
“By common consent, Paul Volcker is never happier than when he is casting for trout in a river or lake, far from the chaos of New York and Washington.
Then, the former chairman of the Federal Reserve will happily wait long hours before landing a catch, and afterwards share in the bonhomie of his fellow fishermen. "When he is away fishing he is a delight," says Jim Wolfensohn, the former World Bank chief who hired Mr Volcker to join his investment firm on leaving the Fed. "He lets his guard down and nobody is interested in his views on interest rates."
That quiet patience is now serving Mr Volcker well. Almost exactly a year ago, Mr Volcker presented a report calling for restrictions on banks engaging in risky activities such as proprietary trading while continuing to enjoy taxpayer support for insured deposits.”
Volcker’s proposal is common sense: If you get a taxpayer guarantee, you cannot behave in a way that is potentially reckless putting taxpayer dollars at risk.
I especially like the next excerpts:
“Long appalled by the lack of what his former protégé Gerry Corrigan calls "financial statesmanship" on Wall Street, Mr Volcker has become increasingly critical of banks since the financial crisis broke.
In mid 2009, he joked that the only useful recent banking innovation was the invention of the ATM; by late last year, this was no longer presented in jest and he was deploring excesses in risk-taking and bonuses.”
Good read the full article (free if you register).
>
Source: Man in the News: Paul Volcker Krishna Guha and Gillian Tett FT, January 22 2010 21:12 http://www.ft.com/cms/s/0/47155caa-0796-11df-915f-00144feabdc0.html
I agree that following Volcker’s lead would be smart – but will anything meaningful be able to make it through Congress? I have my doubts….
The scary thing is that something as obvious correct as “you cannot gamble with your assets at the same time as you have taxpayer supported insurance” or that you “cannot take free money from the fed and use it for “investments” that only serves your own purpose and serves not positive purpose for society” or that “any financial activity that is detrimental or create risk for society should be illegal unless you can demonstrate a positive effect for society that justifies the risk”. Wall street has swallowed a third of our economy and nobody has ever asked if that is acceptable. I say let them grow rice and feed the poor, rather than destroy the economy and pray on the poor.
………”Almost exactly a year ago, Mr Volcker presented a report calling for restrictions on banks engaging in risky activities such as proprietary trading while continuing to enjoy taxpayer support for insured deposits. It was ignored. Though Mr Volcker played an important role in the Obama election campaign, validating the inexperienced candidate, during the past year he appeared to be cast into the outer political wilderness, a lonely advocate of radical structural reforms "“ almost a figure of fun. The former Fed chief was given an advisory committee to chair. But actual policy was made by Treasury Secretary Tim Geithner, National Economic Council chief Larry Summers and White House budget director Peter Orszag”……….
Now that the horses have left the barn they call in Volcker. A little late. Shades of the UN.
Patrick I agree. The horses are out of the barn. We are insolvent. High interest rates tied to bonds of a bankrupt country (106 trillion in unfunded liabilities and 12++++trillion of on the book debt) isn’t going to lure investors.
Besides, the interest on the deficit with Volckerite rates would be the spike through the heart.
The gig is up.
[...] Why Paul Volcker is once again The Man. (Big Picture) [...]
If I remember Volker’s last stint, mortgage interest rates were in double digits. Tightening credit now might mean a sustained turn around in the dollar, but it would kill us. Will Tall Paul save the ranch by burning down the house and the barn? Will little Benny be pulled from the well? Stay tuned . . .
“Volcker's proposal is common sense: If you get a taxpayer guarantee, you cannot behave in a way that is potentially reckless putting taxpayer dollars at risk.”
you would think that would be a normal reaction- but poor advice from bank backer’s Geithner and Summers obviously had the administration’s ear until recently
MA-
good observation- not sure if Volcker will be in the Fed seat- from a strictly political standpoint- it would be better to have BB get renominated- that way if things look grim down the road the finger can still be pointed BB’s way-
if Obama puts in his man- then he owns anything that happens from that point forward-
also- from just a selfish POV- I would like to see BB oversee the mess he has created- to be there overlooking the economic devastation- so that he can take full blame and understand that the ideas bouncing around in his head were the not the path to prosperity but the path to ruin
Volcker is the man. Get him the hell in there ASAP.
WE NEED THE BIG GUY!!!
Volker is simply a nonpartisan public servant, with a great deal of respect. The mere fact that he is finally being heeded is a positive.
He represented, more than any recent Fed Chairman, true independence. I wonder where he stands on the audit of the Fed.
I strongly support the proposal, but let’s not make a demigod of the man. According to Barney Frank, the plan was always to focus on stabilizing the economy first, and then reform it after we had stopped falling. Which is exactly what President Roosevelt did in 1933–he initiated immediate measures to help starving people through the Federal Emergency Relief Act in May 1933, and stabilize the existing bank structure through the Emergency Banking Act in March. Meanwhile, the Securities Act of 1933 for the first time required companies to disclose information to investors. The key word here is “emergency.”
Once these emergency measures had been put in place, Roosevelt began on more enduring reforms meant to prevent another Depression. Glass Steagall had been debated for years before the Depression, and it wasn’t passed until June 1933. The Banking Act of 1935 further reformed the bank system. The Securities and Exchange Commission wasn’t created until Securities Act of 1934.
It was smart to wait for stability before beginning reform, and the administration seems to be proceeding apace with its plans for major reforms. We’ll see if the GOP is willing to follow through on its promise to blockade any attempt at reforming Wall Street. If they do, I think the Dems could actually pick up seats in the Senate in November.
Bank of America announces its new BernankeBucksTM program. Just send a TEXT to your senators’ offices with the promotional code CANVOLCKER and one dollar will be instantly credited to your checking account.
Thanks, Supreme Court!
"Long appalled by the lack of what his former protégé Gerry Corrigan calls "financial statesmanship"
This is the bottom line. The Ayn Randian rationalization that “pure greed is good” will be vanquished.
volKER! volKER! volKER! volKER! ………….. this needs to be the new rallying cry
“Now that the horses have left the barn they call in Volcker” “Glass Steagall had been debated for years before the Depression” “I wonder where he stands on the audit of the Fed” "now? Crickets"
Voter Power via Referendums & www http://en.wikipedia.org/wiki/Referendum scary sounding isn’t it
Volcker’s focus on shifting the banking industry out of the casinos and back to “Main Street” enterprises is an excellent direction. The man is a true statesman and we should all be grateful that he has the President’s ear. And lets hope this is an honest change in policy direction (which I believe it is) and not just a political reaction to recent events. But then just to show my naiveté, I voted for Obama believing he was a centrist.
For those who want Volcker to somehow reenact his actions when he served as Federal Reserve Chair, please understand that we are facing the exact opposite economic circumstances today. The 80s were characterized by high inflation, rapid labor force growth and excessive demand for new housing, autos, etc. Today we face a great risk of deflation, a shrinking labor force and reduced demand.
However, with respect to the economy in general, please keep in mind that job creation has yet to begin in spite of nearly $3 trillion (25% of GDP) in stimulus in the form of roughly equal shares of deficit spending and quantitative easing. What will happen if these props are removed? Realistically, what is going to ignite economic growth sufficiently to offset a 25% “safety net”?
The Great Depression was prolonged for an additional half decade because people and politician became disgusted with the deficit spending and demanded balanced budgets. We appear to on a course of letting history repeat. I do not particularly like how we are deficit spending today (far too much in one-time outlays and far too little in long-term investments both public and private). Nevertheless I am scared to death of the results of reducing deficit spending and quantitative easing at this fragile point in the “recovery” of a very sick economy.
I fear a failure to reappoint Bernanke will be viewed as a mandate to balance the budget and reign in the printing press. This will lead to disastrous consequences in my opinion.
davossherman@gmail.com Says: January 24th, 2010 at 9:24 am Patrick I agree. The horses are out of the barn. We are insolvent. High interest rates tied to bonds of a bankrupt country (106 trillion in unfunded liabilities and 12++++trillion of on the book debt) isn't going to lure investors.
Besides, the interest on the deficit with Volckerite rates would be the spike through the heart.
The gig is up.
Read Full Article »