By Greg Robb, MarketWatch
The Reagan White House stocked the Fed with loyalists — appointing four of seven Fed governors — who challenged Volcker’s leadership. Faced with this internal opposition, Volcker resigned near the end of his second term in 1987.
“Volcker thought inflation was so bad because it undermines trust in government. It’s something I’ve never heard anyone else focus on,” Silber said.
“That’s why he never supported an inflation target of 2%. Once you start saying 2%, where do you stop?” Silber said.
Volcker later said he’d had an inkling that the financial crisis of 2007-08 was looming.
In an interview with Harvard economist Martin Feldstein in 2013, Volcker said he saw a “doomsday scenario” of low interest rates and money pouring into the U.S. from Japan and China.
“It got out of hand and collapsed in a way I wasn’t anticipating particularly, but it did,” he said.
In the wake of the crisis, Volcker pushed for strong new regulation of Wall Street. He wanted one supervisory regulator to oversee Wall Street. And he championed a rule, which ended up named for him, that would prohibit banks from using their own accounts for certain types of short-term trading, and he saw it enacted into law.
Bankers had hated the rule ever since it took effect in 2015, and this year Republicans led a successful effort to ease the Volcker rule’s compliance burden on banks.
In an interview with MarketWatch in 2017, Volcker lamented that Wall Street had lost the discipline that came after the Great Depression.
The former Fed chairman said that, when he started his career, bank executives wouldn’t pay bonuses to individuals because it created the wrong culture. “You can’t imagine a bank these days debating that,” he said.
In a statement, Fed Chairman Powell said he was saddened by the news of Volcker’s passing. “He believed there was no higher calling than public service,” Powell said.