Listen to a top economist in the Obama administration describe Paul A. Volcker, the former Federal Reserve chairman who endorsed Mr. Obama early in his election campaign and who stood by his side during the financial crisis: “The guy’s a giant, he’s a genius, he is a great human being,” said Austan D. Goolsbee, counselor to President Obama since their Chicago days. “Whenever he has advice, the administration is very interested.”
Well, not lately. The aging Mr. Volcker, 82, has some advice, deeply felt. He has been offering it in speeches and Congressional testimony, and repeating it to those around the president, most of them young enough to be his children. He wants the nation’s banks to be prohibited from owning and trading risky securities, the very practice that got the biggest ones into deep trouble in 2008. And the administration is saying ‘no, it will not separate commercial banking from investment operations.’
“I am not pounding the desk all the time, but I am making my point,” Mr. Volcker said in one of his infrequent on-the-record interviews. “I have talked to some senators who asked me to talk to them, and if people want to talk to me, I talk to them. But I am not going around knocking on doors.”
Still, he heads the president’s Economic Recovery Advisory Board, which makes him the administration’s most prominent outside economic adviser. As Fed chairman from 1979 to 1987, he helped the country weather more than one crisis. And in the campaign last year, he appeared occasionally with Mr. Obama, including a town hall meeting in Florida last fall. His towering presence (he is 6-foot-8) offered reassurance that the candidate’s economic policies, in the midst of a crisis, were trustworthy. More subtly, the Obama administration has in Mr. Volcker an adviser perceived as standing apart from Wall Street, and critical of its ways, some administration officials say, while Timothy F. Geithner, the Treasury secretary, and Lawrence H. Summers, chief of the National Economic Council, are seen, rightly or wrongly, as more sympathetic to the concerns of investment bankers.
‘The Obama administration has in Paul Volcker an adviser perceived as standing apart from, and independent of Wall Street, and critical of its ways, while Timothy F. Geithner, the Treasury secretary, and Lawrence H. Summers, chief of the National Economic Council, are beholden to Wall Street interests and more sympathetic to the concerns of the financial industry.’
The Obama economic team, in contrast, would let the ‘Too Big to Fail’ giants survive, but would regulate them better so they don’t get themselves and the nation into trouble again. While the administration’s proposal languishes, giants likeBank of America, Morgan Stanley and Goldman Sachs have re-engaged in old, highly risky and over leveraged trading practices, once again earning big profits, planning big bonuses while placing the nation’s fragile economic recovery in peril.
Read more here.
Source: ‘Volcker Fails to Sell Reform Strategy’ (L. UCHITELLE
NYT, 21 Oct)
