Paul Volcker, who served as chair of the Federal Reserve for two presidents, died Monday. His passing came 40 years after he drove interest rates to record highs in an effort to tame double-digit inflation. Known for his height and his stubbornness, Volcker remained a trusted Washington resource into the Obama administration. Economics correspondent Paul Solman remembers Volcker’s life and work.
And former Federal Reserve Chair Paul Volcker died today. His passing came 40 years after he drove interest rates to record highs to tame double-digit inflation.
Economics correspondent Paul Solman looks back at Volcker's life and work.
At 6'7", Paul Volcker was known as tall Paul. And, indeed, he towered over economic policy for more than 60 years.
President Jimmy Carter chose Volcker to head the Federal Reserve in 1979, when the U.S. faced runaway inflation. To bring prices under control, Volcker, never without a cigar, choked off the money supply, driving up interest rates to discourage lending and borrowing.
Volcker defended the policy on "The MacNeil/Lehrer Report" in 1981.
The way you're going to get those interest rates down is by persisting in policies that will indeed continue to bring the inflation rate down. And at some point, this dam is going to break and the psychology is going to change.
And sky-high interest rates, he figured, would have the desired effect, as they did, but caused deep recession and unemployment that reached nearly 11 percent. Homebuilders sent Volcker their protests scrolled on wooden planks. But Volcker stood tall.
You can't deal with that problem by simply saying, we're going to let inflation go ahead.
Volcker's policies may have cost Carter the 1980 election.
But in a statement released today, the one-term president said: "Although some of his policies as Fed chairman were politically costly, they were the right thing to do."
By 1983, inflation had come down dramatically, and President Ronald Reagan reappointed Volcker, a lifelong Democrat, as Fed chair. But the two soon clashed over the growing federal deficit, which Volcker feared might reignite inflation. Volcker left the Fed in 1987. His last legacy: advising President Obama after the 2008 financial crisis, pressing to restrict commercial banks from making risky investments, a controversial reform known as the Volcker rule.
For the "NewsHour," this is Paul Solman.
Paul Volcker was 92 years old.
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Paul Solman has been a business, economics and occasional art correspondent for the PBS NewsHour since 1985.
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