Paul Volcker, Fed chairman who waged war on inflation, is dead at 92

Paul Volcker helped shape US economic policy for more than six decades.
Paul Volcker helped shape US economic policy for more than six decades.PHOTO: ST FILE

NEW YORK (NYTIMES) - Paul Volcker, who helped shape US economic policy for more than six decades, most notably by leading the Federal Reserve's brute-force campaign to subdue inflation in the late 1970s and early '80s, died Sunday in New York. He was 92.

The death was confirmed by Janice Zima, his daughter.

Volcker, a towering, taciturn and somewhat rumpled figure, arrived in Washington as America's postwar economic hegemony was beginning to crumble. He would devote his professional life to wrestling with the consequences.

As a Treasury Department official under Presidents John F. Kennedy, Lyndon B. Johnson and Richard M. Nixon, Volcker waged a long, losing struggle to preserve the postwar international monetary system established by the Bretton Woods agreement.

As a senior Federal Reserve official from 1975-87, in addition to battling inflation, he sought to limit the easing of financial regulation and warned that the rapid growth of the federal debt threatened the nation's economic health.

In his last official post, as chairman of President Barack Obama's Economic Recovery Advisory Board, formed in response to the 2008 financial crisis, he persuaded lawmakers to impose new restrictions on big banks - a measure known as the "Volcker Rule."

Volcker interlaced his long stretches of public service with a lucrative career on Wall Street, most prominently as chief executive of the investment bank Wolfensohn & Co.

His reputation for austere integrity also made him a popular choice as an independent arbiter. In one instance he oversaw the reclamation of deposits that Swiss banks had failed to return to the families of Holocaust victims.

His defining achievement, however, was his success in ending an extended period of high inflation after President Jimmy Carter chose him to be the Fed's chairman in 1979.

 

He prevailed by delivering shock therapy, driving the economy into a deep recession to persuade Americans to abandon their entrenched expectation that prices would keep rising rapidly.

The cost was steep. As consumers stopped buying homes and cars, millions of workers lost their jobs. Angry homebuilders mailed chunks of two-by-fours to the Fed's marble headquarters in Washington. But Volcker managed to wring most inflation from the economy.