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Volcker, Paul A.


VOLCKER, PAUL A. (1927– ), U.S. economist. Volcker, who was born in Cape May, n.j., was educated at Princeton, Harvard, and the London School of Economics. He began at the New York Federal Reserve Bank as a summer research assistant in 1949, returned as an economist in the research department in 1952, and became a special assistant in the securities department in 1955. Two years later he became a financial economist at Chase Manhattan Bank and returned there in 1965 as a vice president. He served as undersecretary of the treasury for international monetary affairs from 1969 to 1974. He played an important role in the decision surrounding the American decision to suspend gold convertibility in 1971, which resulted in the collapse of the Bretton Woods system. In general Volcker acted as a moderating influence on policy, advocating the pursuit of an international solution to monetary problems. From 1979 to 1987, Volcker served as chairman of the Federal Reserve System, under presidents Jimmy Carter and Ronald Reagan, and president of the Federal Reserve Bank of New York from 1975 to 1990. Volcker's tenure at the Fed was credited with ending the United States inflation crisis of the early 1980s by constricting the money supply through a sharp increase in interest rates. Inflation, at 9 percent in 1980, was lowered to 3.2 percent by 1983. This was predictably accompanied by a decrease in growth, a recession, and by an increase in unemployment, which rose to the highest levels since World War ii. When the inflation was resolved and interest rates were lowered, unemployment and domestic economic growth returned to their normal levels. In the late 1990s Volcker headed a panel that looked to mediate a dispute between Swiss banks and Holocaust survivors. The panel was created by the World Jewish Restitution Organization and the Swiss Bankers Association in 1996 to investigate the dormant accounts. The Jewish groups had accused the Swiss banks of hoarding the wealth of Holocaust victims. Hundreds of auditors pored over bank records for three years, identifying nearly 54,000 accounts that may have belonged to victims of the Nazis. The commission's report lent credence to long-standing charges that the Swiss banks had turned a deaf ear to the needs of Jewish depositors while responding to the orders issued by officials in Nazi Germany. The commission also concluded that it saw no reason to revise the $1.25 billion settlement that Swiss banks agreed to in 1998 to pay Holocaust-era claims. In April 2004 Volcker was assigned by the United Nations to research possible corruption in the Iraqi Oil for Food program. In a report summarizing the research, Volcker accused Kojo Annan, son of United Nations secretary general Kofi Annan, and the Swiss company Cotecna Inspection, Annan's employer, of trying to conceal their relationship. The report accused more than 2,200 companies and prominent politicians of colluding with Saddam Hussein's regime to bilk the humanitarian mission of $1.8 billion. It blamed shoddy management for allowing the corruption to go on for years. The investigators found that companies and individuals from 66 countries paid illegal kickbacks using a variety of methods, and those paying illegal oil surcharges came from, or were registered in, 40 countries. Volcker maintained his interests in the business world. He served on the board of the Nestlé Corporation from 1988 on and was chairman of the Washington-based Group of Thirty.

[Stewart Kampel (2nd ed.)]

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