By Greg Robb, MarketWatch
Federal Reserve Chairman Jerome Powell has but one highly prominent critic — albeit a president who is prolific on Twitter — attacking him. Paul Volcker, the former head of the U.S. central bank who died yesterday at the age of 92, made everyone mad.
Volcker had the White House, Congress, farmers and home builders simultaneously furious with him during his quest to slay the inflation dragon.
“Everyone was really after him. There are famous stories of people even sending him their car keys because their car loans were so expensive,” said William Silber, who wrote the biography “Volker: The Triumph of Persistence” (2012).
Soon after he became Fed chairman in 1979, Volcker pushed interest rates into unprecedented levels — the prime rate soared as high as 21.5% — to get runaway inflation under control.
See also: Paul Volcker was the last Fed chairman who said no pain, no gain
Consumer-price inflation had grown progressively gotten worse in the 1970s, spurred by the OPEC oil-supply shock and easy monetary policy at the beginning of the decade. By the end of the decade the CPI was nearing a 20% annual rate.
Soon after Volcker pushed rates up, unemployment hit 10.8% and the economy lapsed into recession.
While inflation soon fell back to Earth, the damage was done, and Volcker had made countless enemies.
Home builders mailed bricks and 2-by-4s to his office. Farmers surrounded the Fed’s headquarters. Members of Congress were incensed with the economic pain caused by the higher rates and threatened to impeach him.
Rep. Henry Gonzalez, Democrat from Texas, told Volcker at a hearing that he had “legalized usury beyond any limits imaginable.”
Silber said that Volcker was able to withstand the pressure because “he believed deep down that everyone understood inflation was Public Enemy Number One.”
President Jimmy Carter, who had appointed Volcker, was swept out of office. Later, Carter described his decision to appoint Volcker as “a tough one.”
President Ronald Reagan and his advisers were also wary of Volcker.
In his memoir, Volcker described a secret meeting with Reagan and his chief of staff, James Baker, in 1984, at which Baker pressured him not to raise interest rates until after the president had won re-election.