President-Elect Obama Invokes Paul Volcker To Save The Economy
Wednesday, November 26, 2008SUZANNE PRATT: President-Elect Obama has selected one of the most experienced men in the financial world to keep his economic policies on track. Former Federal Reserve Chairman Paul Volcker will head a new panel of outside experts charged with critiquing the president's economic plans. Volcker will get help from Austan Goolsbee, the University of Chicago economist who was an early Obama adviser. Darren Gersh looks at the Obama team's new addition.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Paul Volcker made his name in the 1980s as the Federal Reserve chairman who loved cigars and did not suffer fools lightly, which is part of the reason President-Elect Barack Obama said he was calling on the 81-year old economist to head up a new president's economic recovery advisory board. Modeled after a board that oversees intelligence policy, Volcker's panel will offer what Obama called candid and unsparing criticism of his administration's economic plans.
PRESIDENT-ELECT BARACK OBAMA: The reality is that sometimes policy making in Washington can become a little bit too ingrown, a little bit too insular. The walls of the echo chamber can sometimes keep out fresh voices and new ways of thinking. You start engaging in group think.
GERSH: Economist William Niskanen worked with Volcker in the mid-'80s and says Obama should expect any group think will be challenged in blunt terms. Niskanen says that separates Volcker from some of the other men who've run the Fed.
WILLIAM NISKANEN, CHAIRMAN, CATO INSTITUTE: Alan Greenspan has a record of mumbling in public when he doesn't want to talk. I've never heard in any circumstance Paul Volcker to mumble.
GERSH: Volcker is widely credited with taming inflation in the late '70s and early '80s, even at the cost of sending the economy into a deep recession. That policy hurt Volcker's relationship with President Jimmy Carter. Economist Jared Bernstein advised Obama during the campaign. He says Volcker's credentials as an inflation hawk will be an asset to Obama.
JARED BERNSTEIN, SR. ECONOMIST, ECONOMIC POLICY INSTITUTE: Paul Volcker is this big, hunking guy and when inflation sees Paul Volcker, it runs the other way. He beat it up pretty good back there a couple of decades ago and that was not a message lost on Obama.
GERSH: Niskanen says Volcker's advice will be most needed if and when it comes time to take out the hundreds of billions of dollars the Federal government has pumped into the banking system.
NISKANEN: We face either the prospect of high inflation or for a period of time, very high interest rates to keep all of those reserves from showing up in inflation. And he'll be good advice on that matter.
GERSH: Obama's views on his administration have been shaped by the team of rivals approach Abraham Lincoln took in setting up his cabinet. With Paul Volcker now on the team, Obama has guaranteed he'll be refereeing many economic debates over the next few years. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
