Paul Volcker: The Making of a Financial Legend

No need to be a bellowing bond trader nor an obsessive and fetishistic day trader taking your market temperature by the minute to appreciate NY Times journalist Joseph B. Treaster's most readable biography, Paul Volcker: The Making of a Financial Legend. In our age of cooked corporate books and perp-walking CEOs, Treaster shines an admiring and well-deserved light on the former chairman of the Federal Reserve, a man of towering financial and personal integrity. Words like honor, integrity, truth, steadfastness are thrown around like confetti these days in the political and financial world, but as Fed Chairman from 1979 to 1987, Paul Volcker's strong will and good sense were perhaps the major factors in the survival of the nation's economy through the inflationary tsunami of the Carter years and the financial wrecking ball of Reagonomics. Standing 6'7", physically ungainly and socially reserved and stand-offish, Volcker had a commanding intellect when it came to bigtime economic and financial matters. Born to public service (his father was longtime town manager of Teaneck, NJ), Volcker attended Princeton, Harvard's Littauer School of Public Administration (it eventually became the JFK School of Government) and the London School of Economics. He was a special assistant to David Rockefeller at Chase Bank, served as an undersecretary in Nixon's Treasury Department, ran the New York Bank of the Federal Reserve and became fed chairman in July 1979 while inflation was rocketing and Pres. Carter was bemoaning the national "malaise". Chairman Volcker was the man with the plan. He turned old economic theory upside down with his idea to drastically cut the money supply as the country's economy sweated and shuddered through the debilitating national fits of inflation and recession. Politicians and businessmen, fearful and shortsighted as usual, whined and squealed that Volcker was Dr Kevorkian or Dr. Demento, putting a noose around the national economic neck. In fact, as history has shown and Treaster explains so even the ordinary Joe can understand, Volcker had applied the ideal tourniquet to stop the bleeding and the poison. The patient lived and by the mid-90s, the country was economically healthy and prospering as never before. Of course, like the Lone Ranger, Volcker had ridden off into the sunset by that time. Waved good-bye (and good riddance) by Reagan's Treasury Secretary and the GOP's most artful backroom Machievelli, James A. Baker III in 1987, Volcker turned his enormous economic and monetary talents to the private sector. But this principled and unpretentious public servant with his "unshakeable integrity" was not happy in this work. These days, as the political swamp gases are once again rising and spreading their bad odor, Volcker, even at the age of 76, is being called on once again to perform his public duty. In recent years, Volcker has admirably and successfully refereed the "battle royal" between the Holocaust survivors and

This cleverly-constructed biography not only reminds us of Paul Volcker's tough-minded role in taming inflation in the perilous economy of the '80s into the '90s, but it provide potent insights into his personal life--elements that laid the foundation for the clear thinking, determination and honesty that the American economy still benefits from today. Volcker's city manager/father passed to his son a belief in the worthiness of public service and the need for absolute integrity and perception of integrity. Volcker's public service meant sacrifice for him and his family.This is not a thick volume (244 pages), but it leaves the reader very satisified that he or she has a clear understanding of what drives Volcker, of the politics that brought him to office and then challenged him, of who he is today. It's no wonder the United Nations has turned to him to help investigate its oil-for-food program in pre-war Iraq.The fact that so many "heavyweights" (people like David Rockefeller, Marshall Loeb, Bill Bradley, Ed Koch, etc.) were willing to write pre-publication blurbs that spill off the dustcover into the book itself, and that Arthur Levitt wrote the foreword, reflects the respect they have not just for Volcker but for author Joseph Treaster, a business writer for The New York Times.This book is very readable, well-sourced and documented, and has some delicious photos. As the nation faces the prospect of renewed inflation today, our leaders would do well to read this book and learn its lessons. So would our nation's citizens.

Students of Paul Volcker and economic history would be well served reading "Secrets of The Temple: How the Federal Reserve Runs the Country" by William Greider, former assistant managing editor of the Washington Post, (and author of The Atlantic Monthly's Dec. 1981 classic article: "The Education of David Stockman", another absolute MUST read, available on the internet) in addition to this current and updated study. "Secrets", published in 1987, fresh on the heels of Volcker's term, is a superb study of Paul Adolph Volcker's time period while at the Fed, from the economic & political context leading to Jimmy Carter's appointment announcement of 51 year old Volcker to the Fed on Tues, July 24th, 1979, (the same day Red Sox's Carl Yastrzemski hit home run #400 off Oakland's Mike Morgan, winning 7-3 ;-) up till Reagan's June 2nd, 1987 announcement that Volcker had "decided" to retire, "wishing to return to private life". (The same day the Seattle Mariners drafted Ken Griffey Jr. #1 ;-) Enter the Greenspan era, five terms running.Volcker, in my humble opinion, marks a political earthquake and economic turning point in modern history. Volcker's Fed, switching from Keynesian economics to Milton Friedman's Monetarism theory, via much agony, tamed inflation. Taming inflation, among other things, shifted the balance of power back to the lending class, the rich, holders of financial instruments... away from homeowners, hard asset investments, and mortgage borrowers. Despite inflation's other ill effects, inflation in one significant respect was the middle class homeowner's twin friend: home values, equity, and middle class net worth soared with inflation, while at the same time eroding the true cost and burden of fixed mortgage payments. A double win for the middle class homeowners, where the bulk of their net worth was tied to, unlike the wealthy. Inflation was the lending class's Achilles' heel. When the financial markets realized inflation had been whipped and the early 80's recession was ending... the historic bull markets had their launching pad in place August 12th, 1982, when the Dow bottomed at 777. When the Dow hit 10,000 at the end of the 90's, with reinvested dividends, it marked a return of close to 1,900%. The rich got richer. It took interest rates going to 21% and millions of jobs lost to benchmark the shift in the balance of economic power back in 1980, 81, 82 when the Fed was administering its Rx tonic.Reagan & Thatcher are often attributed "turning economies around", but it was Paul Volcker and the Federal Reserve that should get the bulk credit, imho. Reagan also gets blamed for igniting the widening gulf between rich & poor. But inflation was more a foe of the financial holdings of the rich and friend to the middle class's net worth engine of prosperity, their title to their home's soaring value and month by month cheaper fixed mortgage, via the effects of inflation.I give 5 stars to the topic. Understand the impact of Paul Vol

This is an inspirational book. Joseph Treaster's accomplishment is masterful, timely and urgent. On one level, he presents in disarmingly clear prose compelling new insight and perspective for those who know the tale well along with the essential facts, context, and players from Washington to Wall Street you expect in a first-rate political biography. On another -- and this is the book's true, unexpected gift -- he reconstructs the forging of Volcker's remarkable, civic-minded character. Here are reasons and clues behind the Volcker's commitment to a long career in international economic policy and bank regulation despite considerable personal and family sacrifice until late in life. The source material? Rare interviews with family members, close friends as well as the intensely private, immensely gifted Volcker himself. Treaster devotes one-third of the book to the making of Volcker's character. Paul Volcker's role in framing monetary policies to crush the inflation of the '70s, then prevailing shrewdly against powerful enemies in both political parties -- in the White House and Congress -- to enable these policies to work, was heroic. I followed it closely as a newly arrived New York Times business reporter in 1979. Occasionally, such as the peaking of the prime rate at 21-1/2% in December 1981, I was assigned to write directly about the impact. Like millions of Americans, mmembers of my own family paid a price, short-term and long-term, for Volcker's convicton. With mortage rates climbing above 16% in the early '80s, my father was unable to market a new condominium project in the Middle West; the condo my wife and I owned in Westchester County stood unsold and vacant for a year after our transfer to the West Coast. My father was furious with Volcker, wary of more financial pain that indeed lay ahead. I was more temperate, aware of Volcker's logic, sensing a steadfast hero in the making (even as my meager savings were depleted), and anticipating economic revival that soon was manifest. Absent the accomplishments of Paul Volcker preceding him, Alan Greenspan never would have had the good fortune to guide the booming economy in the '90s. Treaster makes the case. Volcker's frugal, stern father was town manager of Teaneck, New Jersey, for 20 years, 1930-1950. During that period, Teaneck became known as a model of small-town America in large part because Paul Volcker Sr. worked to create, sustain and protect the vision and the public policies required to achieve it. His principled practice of standing firm against the narrow interests of town politicians made an impact on Paul Jr. The unemotional, fact-based detachment with which his father engaged his adversaries in public forums played well on Capitol Hill a generation later. Volcker's legacy at the Fed, his pivotal leadership in brokering the $1.25 billion payment by Swiss banks to Holocaust victims, and his ultimately futile effort to save the Arthur Andersen accountancy from its ethical bl

A huge man like Paul Volcker deserves a giant biography, and that is exactly what Joseph B. Treaster, veteran New York Times reporter, has provided. Volcker was literally a giant of a man, physically and financially. While he towered over everyone at six feet, seven inches, he also guided the nation's economy through one of its most troubled times. In 1981, inflation raged and interest rates had soared beyond 20 percent, which some felt bordered on usury. A one-man army, Volcker remained determined to extinguish inflation's fire, so he used the fiscal flame retardant called higher interest rates. Initially, millions hated him, but after his program of tough love worked, they loved him. The economy righted itself, providing the base for the incredible expansion of the 1990s. Through diligent research and excellent prose, Treaster explains how Volcker performed these economic miracles and what they meant to both the Wall Street financier and Joe Sixpack. At 76, Volcker is still active, involving himself with noble causes like working on behalf of Holocaust survivors. Here is a man worth knowing, and here is a biographer worth reading.