By MONICA LANGLEY
APRIL 11, 2009
Source (
...front run trades)
WASHINGTON -- As an early supporter of Barack Obama, Paul Volcker gave the young presidential candidate gravitas and advice. He frequently sat by Mr. Obama's side at key economic events, and started carrying a cellphone for the first time, just to be able to brainstorm with the candidate from the campaign trail.
In the Obama White House, the role of the 81-year-old former chairman of the Federal Reserve has been more limited.
The one-time central banker has been put in charge of a presidential advisory board that hasn't yet had a formal meeting. It has been nearly a month since he has seen Mr. Obama. Mr. Volcker hasn't been a main player in key decisions handling the global financial crisis.
Treasury Secretary Timothy Geithner unveiled the administration's plans for handling troubled financial institutions and the housing crisis without seeking input from Mr. Volcker, associates say. "Paul was surprised" at the failure to consult him, particularly on issues of financial rescue after his dominant role in resolving financial crises in the 1980s, says one person who has spoken to Mr. Volcker recently.
On the eve of one announcement, a Wall Street executive ran into Mr. Volcker at a cocktail party and asked what he expected from the Treasury secretary's imminent announcement. "I have no idea what Tim's going to say," he responded, according to somebody there.
A Treasury spokeswoman said Mr. Volcker was "briefed" on all plans, including the latest one addressing banks' toxic assets. A White House spokeswoman said that Mr. Volcker "is a valued economic adviser to the president and the administration." She said that his "advice on issues including regulatory reform and financial stability are invaluable to the administration."
Mr. Volcker, who recently had a pacemaker implanted in what he told friends was a "trivial procedure," said in a brief telephone interview Wednesday that he has no complaints about his role. "How they use me is up to them," Mr. Volcker said. "I'm conflicted about wanting to go fishing and being responsive....I might get busier than I want to be." He declined to comment about specific areas where he was or wasn't consulted.
When Mr. Obama announced the blue-ribbon advisory group on Feb. 6, he praised Mr. Volcker as "one of the world's foremost economic policy experts." With big names like General Electric Co. Chief Executive Jeffrey Immelt, the group, Mr. Obama said, would provide "voices to come from beyond the Washington echo chamber...." At a ceremony in the White House's East Room, the president added that the group would "meet regularly" with him.
So far, the full group hasn't met. "The whole organizational side of this has been a nightmare," Mr. Volcker says. A White House spokeswoman says it will hold its first quarterly meeting in mid-May.
In the meantime, Mr. Volcker and his members have divided themselves into subgroups such as financial regulation, employment growth and housing, and are holding conference calls, two members say.
When Mr. Volcker was in town earlier this week, he met with Mr. Geithner, Lawrence Summers, the chief White House economic adviser, and Christina Romer, the chairwoman of the Council of Economic Advisers, to discuss financial regulation.
A key ally for Mr. Volcker inside the White House is Austan Goolsbee, the chief economist of his panel, and a member of the council. The pair grew close during the campaign when Mr. Goolsbee, Mr. Obama's chief economic adviser, worked to bring in Mr. Volcker after he indicated his support for the underdog candidate.
Mr. Goolsbee says he talks with Mr. Volcker three or four times a week and helps get his views to the president and to senior administration officials. The task force, and particularly Mr. Volcker's input, "is meant to serve a role akin to an economic version of the president's BlackBerry," Mr. Goolsbee says. Messrs. Volcker and Goolsbee also send periodic memos to the president on the issues.
Mr. Volcker's advice hasn't always been heeded. The former Fed chairman urged the administration to "slow down" its push for regulatory changes. "Paul thought it was important to take enough time to fill holes in the regulatory framework and not get caught up in the current atmosphere," says former Securities and Exchange Commission Chairman William Donaldson, who's on the Volcker panel.
When a former Fed official, attorney John Walker, recently met Mr. Volcker, Mr. Walker told him the administration "isn't getting the best use of you." Mr. Volcker shrugged it off, saying he's comfortable with his role. Mr. Walker says Mr. Volcker added: "I'm 81 years old."
Write to Monica Langley at
monica.langley@wsj.com