Saturday, April 11, 2009

Paul Volcker Assumes Smaller than Expected Role with Obama

We were very excited when word first came that Paul Volcker (Fed head before Greenspan) would be part of the Obama economic team - a man of gravitas who is not afraid to make very hard decisions at the cost of near term popularity. Volcker is not in bed with the banks or Wall Street itself unlike Timmy and Larry. But as each month has passed, we've only seen more and more freezing out of this man [Mar 6, 2009: Where is Paul Volcker?] , and at this point I would not be surprised to see him step down within 12 months from his post. I am beginning to get vibes of Paul O'Neil here. Instead of listening to a person like this, the official policy is now to make the easy money policies of Alan Greenspan look like child's play. It is just a sad spectacle... just as with Greenspan we'll laud the solutions (1% interest rates did fix everything... well they papered over everything for a while anyhow) and then face some incredible fallout "later".

  • As an early supporter of Barack Obama, Paul Volcker gave the young presidential candidate gravitas and advice. He frequently sat by Mr. Obama's side at key economic events, and started carrying a cellphone for the first time, just to be able to brainstorm with the candidate from the campaign trail. In the Obama White House, the role of the 81-year-old former chairman of the Federal Reserve has been more limited.
  • The one-time central banker has been put in charge of a presidential advisory board that hasn't yet had a formal meeting. It has been nearly a month since he has seen Mr. Obama. (pathetic) Mr. Volcker hasn't been a main player in key decisions handling the global financial crisis.
  • Treasury Secretary Timothy Geithner unveiled the administration's plans for handling troubled financial institutions and the housing crisis without seeking input from Mr. Volcker, associates say. (because he knows Volcker would simply tell him this is looting of the taxpayer and a handout for the monied elite - why ask when you already know the answer?)
  • "Paul was surprised" at the failure to consult him, particularly on issues of financial rescue after his dominant role in resolving financial crises in the 1980s, says one person who has spoken to Mr. Volcker recently.
  • On the eve of one announcement, a Wall Street executive ran into Mr. Volcker at a cocktail party and asked what he expected from the Treasury secretary's imminent announcement. "I have no idea what Tim's going to say," he responded, according to somebody there.
  • "How they use me is up to them," Mr. Volcker said. "I'm conflicted about wanting to go fishing and being responsive....I might get busier than I want to be." He declined to comment about specific areas where he was or wasn't consulted.
  • When Mr. Obama announced the blue-ribbon advisory group on Feb. 6, he praised Mr. Volcker as "one of the world's foremost economic policy experts." At a ceremony in the White House's East Room, the president added that the group would "meet regularly" with him. So far, the full group hasn't met. "The whole organizational side of this has been a nightmare," Mr. Volcker says.
  • A key ally for Mr. Volcker inside the White House is Austan Goolsbee, the chief economist of his panel, and a member of the council. The pair grew close during the campaign when Mr. Goolsbee, Mr. Obama's chief economic adviser, worked to bring in Mr. Volcker after he indicated his support for the underdog candidate. Mr. Goolsbee says he talks with Mr. Volcker three or four times a week and helps get his views to the president and to senior administration officials. (while I like Goolsbee from what I have seen of him, it is quite sad that the person who people perceived as "3rd in line" in the economic team behind Geithner and Summers has to go through a middleman)
Ah well - I've given up hope a few weeks ago and now just clap my hands joyfully each time I hear more paper currency printed, so this is just another notch in that belt.

Bloomberg: Volcker Clashes with Summers.

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