The Paul Volcker Surge

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After a spell in the political wilderness, where his financial reform proposals received scant attention, Paul Volcker looks to be fully back in the mix. The former Federal Reserve chairman from 1979 to 1987, Volcker now has the ear of both Obama and the current Fed chair, Ben Bernanke. According to a Bloomberg story today, Volcker met with Bernanke six times—five of which were one-on-one meetings—between January and November 2009; by contrast, Volcker met with Bernanke only once in the year before that. And it’s obvious that Volcker has had plenty of contact with the top financial gurus in the Obama administration: After all, the president’s push to ban proprietary trading by throwing up a firewall between commercial banks’ deposits and their riskier trading operations is being called the “Volcker Rule.” 

For the most part, this surge of Paul Volcker’s is a good thing. Since Obama took office last year Volcker has been pushing rigorous, important reforms—reining too-big-to-fail institutions, restoring parts of the Glass-Steagall Act—but had clashed with administration officials like National Economic Council Director Larry Summers and hadn’t exerted much influence despite his stature as one of the leading economists in the country. A veteran of Beltway economic policy, Volcker also appears to have little patience for powerful lobbyists like the US Chamber of Commerce or the Securities Industry and Financial Markets Association (SIFMA) who support “reform lite.” And while Volcker’s backing of the Fed to keep its watchdog role overseeing financial institutions and consumer protection may not be best for the country, given how poorly the Fed did that job before the crisis, his rise within the financial reform debate can only improve the odds for a bill that actually limits excessive risk-taking and tries to prevent future crises.

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