Paul Adolph Volcker Jr.
Economist; 12th chair of the Federal Reserve Bank
Born: September 5, 1927, in Cape May, New Jersey
Died: December 8, 2019, in New York City
New Jersey Hall of Fame, Class of 2021: Enterprise
A big man in both stature (he stood 6-foot-7) and influence, Paul Volcker helped shape American monetary policy for more than six decades. Best remembered for his efforts to reel in inflation, Volcker served two terms under two presidents as chair of the Federal Reserve Bank from 1979-1987.
Born in Cape May, Volcker was raised in Teaneck, where he played high school varsity basketball and his father served as city manager. Volcker received his bachelor’s degree from Princeton University and a master’s from Harvard. In 1952, he took a job as an economist at the Federal Reserve Bank In New York. Five years later, he left for a position at Chase Manhattan Bank. This began a career-long pattern of shuttling between government jobs and the private sector, including a period starting in 1974 when he was a visiting fellow at Princeton.
Volcker’s government posts included deputy undersecretary for monetary affairs in the Treasury Department and president of the Federal Reserve Bank of New York, where he became actively involved in decision-making on monetary policy. In 1979, following a sharp rise in inflation, President Jimmy Carter nominated Volcker to be board chair of the Federal Reserve Bank. Here, Volcker had his greatest impact. He instituted policies to fight inflation, tighten controls on banks and limit the size of the national debt.
Volcker’s efforts to slay what he called “the inflationary dragon” proved controversial and painful. His intention was to slow spending by driving up interest rates. But rates rose higher than expected, which plunged the economy into recession. Consumer spending dropped; unemployment soared. Auto dealers reportedly sent the Fed keys to unsold cars. Homebuilders sent chunks of two-by-four lumber. And in 1980, the weakened economy helped cost President Carter his job.
In the long run, Volcker’s harsh policies worked and by 1983 (with Ronald Reagan as president), inflation had slowed and the nation was back to work. After leaving the Fed in 1987, Volcker served as chair of the National Commission on Public Service and later as chair of the International Accounting Standards board of trustees. He also chaired numerous committees, including one formed to mediate the claims between Holocaust victims and their survivors and Swiss banks.
President Barack Obama cast Volcker in his final public role as a chairperson of his Economic Recovery Advisory Board from 2009 to 2011. During his tenure, he introduced what became known as “the Volcker Rule,” a provision limiting banks and other financial institutions from making certain highly risky types of investments.
Upon Volcker’s death, Carter said in a statement: “Paul was as stubborn as he was tall… and although some of his policies as Fed chairman were politically costly, they were the right thing to do.” Indeed, as the New York Times stated in its obituary of Volcker, inflation has remained under control ever since Volcker’s tenure atop the Fed.