The
former Fed chairman, whose memoir will be published this month, had a feisty
take on the state of politics and government during a recent interview.
·
Oct. 23, 2018
Paul Volcker, wearing a blue sweatsuit
and black dress socks, stretched out on a recliner in the den of his Upper East
Side apartment on a Sunday afternoon. His lanky 6-foot-7 frame extended beyond
the end of the chair’s leg rest. He added an ottoman to rest his feet.
“I’m not good,” said Mr. Volcker, 91,
the former Federal Reserve chairman, who came to prominence after he used
shockingly high interest rates to help end the runaway inflation of the late
1970s and early ’80s. Long one of finance’s wise men, he has been sick for
several months.
But he would rather not talk about
himself. Instead, Mr. Volcker wants to talk about the country, the economy and
the government. And if he had seemed lethargic when I arrived, he turned lively
in his laments: “We’re in a hell of a mess in every direction,” he said.
Hundreds
of books surrounded Mr. Volcker — filling shelves and piled high on virtually
every flat surface — as did pink pages of The Financial Times, folded into
origami. “Respect for government, respect for the Supreme Court, respect for
the president, it’s all gone,” he said. “Even respect for the Federal Reserve.
“And
it’s really bad. At least the military still has all the respect. But I don’t
know, how can you run a democracy when nobody believes in the leadership of the
country?”
Before Mr. Volcker fell ill, he
finished his memoir, “Keeping
at It: The Quest for Sound Money and Good Government.” The book was supposed to
be published in late November, but given Mr. Volcker’s health, its
publisher, PublicAffairs, a unit of Hachette, moved its release up to Oct.
30.
“I
had no intention of writing a book, but there was something that kind of was
irritating me,” he said. “I’m really worried about this governance thing.”
The
book, which Mr. Volcker wrote with Christine Harper, editor in chief of
Bloomberg Markets, is a telling memoir about a man who not only redefined the
role of Fed chairman but, after the financial crisis, conceived of a namesake
rule that eliminated some of the most blatant risk-taking by Wall Street banks.
The Volcker Rule, which was part of the Dodd-Frank regulatory legislation.
“There is no force on earth that can stand up
effectively, year after year, against the thousands of individuals and hundreds
of millions of dollars in the Washington swamp aimed at influencing the
legislative and electoral process,” he wrote in the book.
The memoir is at times a dishy tale of
Mr. Volcker’s years in Washington. For example, while President Trump
has complained in recent months about the Fed’s plan to raise interest rates,
he isn’t the first to try to influence the independent Federal Reserve. Mr.
Volcker recounts being summoned to meet with President Ronald Reagan and his
chief of staff, James Baker, in the president’s library next to the Oval Office
in 1984.
Reagan “didn’t say a word,” Mr. Volcker
wrote. “Instead Baker delivered a message: ‘The president is ordering you not
to raise interest rates before the election.’” Mr. Volcker wasn’t planning to
raise rates at the time.
“I was stunned,” he wrote. “I
later surmised that the library location had been chosen because, unlike the
Oval Office, it probably lacked a taping system.”
The book is not limited to tales of the
past, however. It addresses current policy, like the 2 percent inflation target
that has become the goal of the Federal Reserve.
“I
puzzle at the rationale,” he wrote. “A 2 percent target, or limit,
was not in my textbook years ago. I know of no theoretical justification.”
With a laugh, he told me that he
believed the policy was driven by fears of deflation. “And we haven’t had any
deflation in this country for 90 years!”
But there is something more worrisome
affecting policy than fear, he told me. Money.
Over the din of traffic outside an open
window, Mr. Volcker hoarsely sounded an alarm on the power it has to shape our
culture and our politics.
“The central issue is we’re developing
into a plutocracy,” he told me. “We’ve got an enormous number of enormously
rich people that have convinced themselves that they’re rich because they’re
smart and constructive. And they don’t like government, and they don’t like to
pay taxes.”
Washington, when he arrived, “was a
city filled with bureaucrats,” he said. “It didn’t make them bad.” At the time,
civil servants — like his father, the township manager of Teaneck, N.J. — were
respected. “I grew up in a world in which good government was a good term,” he
said. But things have changed. Today, he
said, Washington is overrun by lobbyists and think tanks. Mr. Volcker,
who started a nonprofit to
improve education for public service, contends that our educational system has
been perverted by money. Schools like the John F. Kennedy School
of Government at Harvard and the Woodrow Wilson School of Public and
International Affairs at Princeton, he said, have failed to educate a new
generation of civil servants. He said they no longer taught governing but
policy — a shift that he contended allowed them to hold forums and discussions
with generals and under secretaries.
“Rich guys,” he said, “like to go.” He
called it “hobnobbing wholesale.”
“They
can argue war and peace and poverty and everything else,” he said. “But when
you go to a school of public policy, you’re not learning how to run the goddamn
government. You’re learning how to debate political issues.”
Unlike President Barack Obama, who invited Mr. Volcker to consult on economic and regulatory policy — and asked him if he would be willing to be Treasury secretary, he said — this White House hasn’t called him. Even so, he has met Mr. Trump twice, both times before he took office.
Unlike President Barack Obama, who invited Mr. Volcker to consult on economic and regulatory policy — and asked him if he would be willing to be Treasury secretary, he said — this White House hasn’t called him. Even so, he has met Mr. Trump twice, both times before he took office.
The first meeting was after Mr.
Volcker left the Federal Reserve in 1987. “I was walking down the street,
somebody calls out: ‘Hey, Paul! Hey, Paul!’ He comes running across the street
and says, ‘Hi, I’m Donald Trump.’”
The other was an unsuccessful attempt
by Mr. Volcker to get Mr. Trump to use “The Apprentice” to raise money for a
charitable organization. “We had a very nice lunch, and he said, ‘Interesting
idea,’ but put me off otherwise,” Mr. Volcker said.
Mr. Volcker is no great fan of the
president, but he acknowledged that Mr. Trump had cannily recognized the
economic worries of blue-collar workers. Mr. Trump “seized upon some issues
that the elite had ignored,” he said. “I don’t think there’s any question about
that, in kind of an erratic way, but there it is.”
He wondered how many lectures and
presentations he had sat through with economists “telling us open markets are
wonderful, everybody benefits from open markets.”
Eventually,
Mr. Volcker said, someone in those lectures would always ask, “What about that
poor manufacturer in my town?” But that concern was dismissed too easily,
with talk of worker retraining or some other solution far easier said than
done.
Today, Mr. Volcker is already starting
to worry about the next financial crisis. Asked about the stability of the
banks, he said, “They’re in a stronger position than they were, but the honest
answer is I don’t know how much they’re manipulating.”
That, he said, is the real challenge
facing economic policymakers. “Everybody talks about monetary policy,” he said,
“but the lesson of all this is we need better, stronger supervisory powers.”
Even as our conversation came to an
end, Mr. Volcker looked as if he could keep talking for hours. I told him that,
rather than look sick or depressed about the state of the world, he appeared
energized. Or, I told him, that was at least the impression he left.
“Leave
it that way,” he said.
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