Obama Names Volcker to Head Panel on Reviving Economy (Update4)
By Kim Chipman and Catherine Dodge
bloomberg.com
Nov. 26 (Bloomberg) -- President-elect Barack Obama named former Federal Reserve Chairman Paul Volcker to head a new White House economic board that will propose ways to revive growth as the U.S. grapples with an “economic crisis of historic proportions.”
“At this defining moment for our nation, the old ways of thinking and acting just won’t do,” Obama said at a news conference in Chicago, his third in as many days.
Volcker, 81, will be chairman of the President’s Economic Recovery Advisory Board. The panel’s top staff official will be Austan Goolsbee, a University of Chicago economist who will also be a member of the president’s Council of Economic Advisers.
The panel, which will include experts from outside government, will meet about once a month and periodically brief Obama with advice on how to shore up financial markets. Volcker’s position will be part-time.
“Sometimes policymaking in Washington can become too insular,” Obama said. “The walls of the echo chamber can sometimes keep out fresh voices and new ways of thinking, and those who serve in Washington don’t always have a ground-level sense of which programs and policies are working.”
Treasury Secretary
Volcker, who throttled the economy to crush inflation in the 1980s, was an adviser to Obama during the presidential campaign. He was a candidate for Treasury secretary, a job that went to Federal Reserve Bank of New York President Timothy Geithner.
“He is one of the most independent-thinking guys you could find and brings massive reputation,” Ethan Harris, co- head of U.S. economic research at Barclays Capital Inc. in New York, said before today’s announcement.
Volcker was appointed Fed chairman in August 1979 as the U.S. experienced what then-President Jimmy Carter called a “crisis of confidence.”
With Carter hobbled by a hostage crisis in Iran, long lines at gas stations and inflation of more than 10 percent, Volcker unleashed interest rates and began to clamp down on the quantity of money in the banking system.
Vilified at the time for causing one of the worst recessions since the Great Depression, Volcker was later lauded for his assault on runaway prices and became an icon for a generation of central bankers from New Zealand to South Africa.
He resigned from the Fed chairmanship in 1987, before the stock market crash of that year, saying he hadn’t been fair to his family, could make more money outside public service and didn’t want a third term.
‘Pulls No Punches’
“Paul has served under both Republicans and Democrats and is held in the highest esteem for his sound and independent judgment,” Obama said. “He pulls no punches.”
Volcker has voiced his contempt for Wall Street’s risk- management and is likely to come to the job ready to impose tougher restrictions.
Banks have taken at least $685 billion in credit losses and write-downs in a crisis that began with soaring default rates on high-risk mortgages and ended up redrawing the entire U.S. financial landscape.
Obama is signaling he wants his economic team in close proximity. In the new administration, the offices of the Council of Economic Advisers, a three-person panel established in 1946 to provide the president with independent economic analysis, will move into the White House, according to a person familiar with the matter. Right now, only the chairman has an office there.
New Board
Volcker’s panel will be modeled on the Foreign Intelligence Advisory Board, which was set up in 1956 by then- President Dwight Eisenhower to track spying activities during the Cold War.
Volcker will play a key role in shaping the new economic board, which will report directly to Obama. The aim is to bring in leaders from business, academia and elsewhere to provide an independent perspective.
As top staff person, Goolsbee will act as a liaison between the panel and the administration. Obama said he will announce the remaining members of the economic board in the coming weeks.
Consumer Confidence
Among the board’s first concerns will be consumer confidence. A government report today showed consumer spending declined by the most since the 2001 recession.
Asked about advice he’d give to anxious shoppers as they head into the holiday season, Obama said they should rest assured “that my administration intends to get this economy back on track.”
Americans “understandably are nervous about their future,” Obama said. “It is important for the American people, though, to have confidence that we’ve gone through recessions before.”
The president-elect today also addressed criticism that his Cabinet picks so far suggest a recycling of the Clinton administration that calls into question the central theme of Obama’s candidacy, his commitment to change.
Obama rejected this idea, saying it’s only natural some people from the Clinton era would be part of his Cabinet and he’s seeking a combination of “experience with fresh thinking.”
Experience Needed
“The last Democratic administration that we had was the Clinton administration,” he said. “It would be surprising if I selected a Treasury secretary who had no connection with the last Democratic administration, because that would mean that the person had no experience in Washington whatsoever.”
Obama announced in a separate statement that Jonathan Favreau, his chief speechwriter during the campaign, will hold that post at the White House. For his director of intergovernmental affairs, Obama has picked Cecilia Munoz, currently a senior vice president at the Washington-based Latino advocacy group National Council of La Raza.
To contact the reporters on this story: Kim Chipman in Chicago at kchipman@bloomberg.net; Catherine Dodge in Washington, at Cdodge1@bloomberg.net
Last Updated: November 26, 2008 13:19 EST |
