Keeping At It by Paul Volcker & Christine Harper

Author:Paul Volcker & Christine Harper
Language: eng
Format: epub
Publisher: PublicAffairs
Published: 2018-11-26T16:00:00+00:00

Last Days at the Fed

By the time of the Basel Agreement, my commitment to leave office early was well past its sell-by date. After the short-lived revolt and the vice chairman’s resignation, the time hadn’t seemed quite right. Relations with both the president, and seemingly with the secretary of the Treasury, had returned to an even keel.

There was clearly unfinished business. Only limited progress had been made in efforts to relax outmoded restrictions on interstate banking. More importantly, leakages in the old Glass-Steagall restrictions on trading and investment banking left open questions about partial or complete repeal. The Federal Reserve itself had begun easing the possibility of trading activities in bank subsidiaries. Long discussions about reform with Don Regan and later Jim Baker did not materialize in legislation.

That unfinished business in no way changed my intention to leave. I ran into Howard Baker, Reagan’s new chief of staff, at a New York Times reception in late May. I suggested a meeting. First thing the next morning, he was at my office.

I told him that I didn’t want to be reappointed and that the time had come to announce a successor. He protested with some apparent vigor, insisting I should stay. But eventually he asked whom I would suggest.

My answer was twofold. John Whitehead, the highly respected former co-chair of Goldman Sachs, was clearly qualified by experience and temperament. In those days, Goldman was still a partnership and I viewed it as a highly principled, client-driven investment bank. Former Treasury secretary Joe Fowler was a partner and prized the firm’s culture. Whitehead was, at that time, serving as George Shultz’s deputy secretary of state and seemed to get along very well in Washington. (He later expressed to me with some feeling that his limited Washington years—where he met his new wife, the journalist Nancy Dickerson—were among the most satisfying of his life.)

Alan Greenspan was the other, more obvious choice. I had known him, not well, since the earliest days of our professional lives in New York. He was a superb financial technician, a long-standing Republican, and had strong free-market views.

A few days after I met with Howard Baker, Jim Baker chimed in. He told me that, in effect, it was my responsibility to stay. I must reconsider over the weekend. He would arrange a meeting with the president on Monday, June 1. My overall impression that he would not be personally heartbroken by my decision to leave has since been confirmed: according to one report he thought I would slow the momentum toward freeing the banks from Glass-Steagall, a politically sensitive objective.

I deeply appreciated the unsolicited support for my reappointment from a group of senior senators, led by the majority leader Bob Dole. But I also recalled some advice I’d gotten from Joe Fowler years earlier. When you want to leave a senior government post, put the resignation in writing and present it. That way you can’t be talked out of it.

So I dutifully did put my decision not to accept a third term in writing.

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