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The gentler side of America's money master.

The Gentler Side of America's Money Master

His public persona is larger than life.

Indeed, in any listing of giant figures in late 20th century American history, the name of Paul Volcker will surely be included.

In the important arenas of our national economy and international monetary policy, Paul Volcker is truly a giant among men - he is widely credited with breaking the back of American inflation in the early 1980s and bringing about the economic recovery we are still enjoying today.

This larger-than-life persona is reinforced upon meeting the former chairman of the Federal Reserve Board. His 6-foot-7 1/2-inch frame creates an imposing presence which, coupled with his deep baritone voice, commands respect.

That is the Paul Volcker America knows from the pages of newspapers and 30-second bites on the evening news. What is not always seen behind the headlines and news clips, however, is that there is also a gentle side to this man. Few are aware of the former Chairman's understanding and compassion for human suffering and his willingness to get involved in a cause he believes can better people's lives.

Putting the Brakes on Inflation

As chairman of the Board of Governors of the Federal Reserve System from 1979 to 1987, Paul A. Volcker, Jr. served as America's primary "money master" during some of the worst economic times - and some of the best - in recent history. It was largely due to his foresight and initiatives that the spiraling inflation of the late 70s and early 80s was brought under control and the eventual strong recovery started.

"I start from a simple conviction," he says, "that the economy works better with some sense of price stability than when there is all the uncertainty attached to rapid inflation. I suppose the turning point for our economy was when people began to believe that prices were going to stabilize, and I think the stability has something to do with the fact that the recovery has lasted as long as it has."

But, in order to bring about that sought-after stability, Volcker had to make some unpopular decisions along the way. When he assumed chairmanship of the Fed in 1979, one of his first initiatives to control inflation was to put strict limits on the growth of the money supply. The result, he knew, was that things would get worse before they got better. Indeed, interest rates skyrocketed and the American economy plunged into the worst recession since the Great Depression.

Understandably, Volcker was often a scapegoat for the country's problems during those troubled economic times. To the world, he often appeared stone-faced and unfeeling about the misery around him. But those who know Volcker best - those who know his gentle side - know just how troubled he was by the hardships people were experiencing. Even now, he remembers some of the letters he received from people in pain.

"One woman wrote to tell me about how her mother and father had been saving all their lives to buy a home. They had finally scraped together enough money to get this house in which they were going to retire and live the rest of their lives. But interest rates had gotten so high that this great thing they had saved for and looked forward to was no longer possible.

"I had sympathy for these people, and I wished I could help them. But you have to tell yourself that you are trying to do what you think is best for the most people over the long run. I might have saved that particular woman's parents' mortgage if I did something different, but how many other people's mortgages would have been impossible if inflation kept going up?"

Indeed, by 1983 inflation had been curbed, and interest rates were falling back to pre-recession levels. Not everyone agreed with all of his methods, but today few doubt that if Paul Volcker had not stopped American inflation when he did, things would be worse now.

The Second Most Powerful Man in America

Volcker's appointment as chairman of the Federal Reserve in 1979 was the culmination of a lifetime of dreams and preparation. As the only son of the Teaneck, N.J., city manager, Volcker developed a reverence for public service early on. Prior to assuming the Federal Reserve chairmanship, he served in a variety of government jobs, including Treasury under secretary for monetary affairs and president of the Federal Reserve Bank of New York.

During his years at the Fed, Volcker was described as a genius, as the godfather of the economy, as the best chairman in the Federal Reserve's history, as the second most powerful man in America, and, for a time, even as public enemy No. 1. How does he describe himself?

"Probably none of the above," he laughs. He would like to be remembered as someone who was "reasonably honest - that should be taken for granted, but I suppose it isn't these days -" and who "tried to do a decent job for the country with no particular axes to grind."

If that sounds like an incredibly modest self-description for someone who for years had more leverage over the daily lives of more Americans than anyone except President Reagan, it is characteristic of the enigmatic Mr. Volcker. This same modesty is evident immediately upon meeting the former chairman. Although he has appeared on the cover of virtually every newspaper, news weekly and business magazine in America, he seems totally unimpressed by his own celebrity status. Today, as a well-paid investment banking executive and elite university professor, his income would certainly allow him to live in as extravagant a manner as he might choose, but Volcker is not given to such shows of excess. He seems to have no need for - nor interest in - the usual trapping of financial success.

The Volckers still live in the same New York home they have shared for 15 years; he occasionally wears suits that have been staples of his wardrobe since before his days at the Fed; and his office in Midtown Manhattan would be considered modest for most large-company executives. His bookshelves are filled with bric-a-brac and memorabilia, but no plaques, awards or photos with the president are to be found. Rather than expensive oil paintings and watercolors, his walls are adorned by simple prints of wildlife scenes and a portrait of a clown painted by his daughter Janice when she was 10 years old.

The Transition to Private Life

When Volcker left the Federal Reserve following his second consecutive four-year term in August 1987, he received many offers from companies and firms willing to pay big bucks in order to be associated with him and share in his financial expertise. He chose a position as chairman of James D. Wolfensohn Inc., a small, successful New York investment banking firm, where he helps some of the world's largest companies plot their financial strategy. He is also a half-time professor of international economics at his alma mater, Princeton University, and he sits on the boards of several international corporations.

Why, then, does he continue to give his valuable name and time to non-profit and charitable causes in which he believes? Obviously because he cares...because of his seldom-seen gentle side.

One of Volcker's primary concerns away from the profit-making world is the fight against arthritis, and there is a very personal reason for this interest. Barbara Volcker - Mrs. Paul Volcker for the past 35 years - has suffered with severe rheumatoid arthritis since the late 1960s, when she was only 40 years old. Volcker knows first-hand just how arthritis can impact a life and a family. He also knows the frustrations many people with arthritis feel when they learn there is no cure; no relief; no answers.

"I will never forget when she was diagnosed," he says of his wife's arthritis. "She was having pain, and she was in the hospital for a while. After about a week, they finally said `We have conclusively proved that you have rheumatoid arthritis.' We said, `Well, what do we do now?' and they said `We don't know what to do about that. You go home.' There was this sense that they had done their detective work and there was no longer any uncertainty on their part about what she had, but there was no real cure; they really couldn't help her very much."

Fortunately, there have been many advances in the treatment of arthritis during the past 20 years, and Barbara Volcker, like many of the estimated 37 million Americans with arthritis, has been able to find some relief through medications and treatment programs. But, still, nothing can be done to arrest the underlying disease process; nothing can be done to completely ease the pain; nothing can be done to totally offset the damaging effects of the arthritis diseases.

The frustration that comes from lack of understanding and lack of public attention to arthritis was one of the reasons Volcker lent his name and his efforts to the fight against arthritis. His involvement with the Arthritis Foundation began in 1984, when he was honored at the New York Chapter's Founders' Award dinner. He has remained active with that chapter and still chairs its Senior Advisory Board.

In early 1988, shortly after Volcker stepped down from the Federal Reserve, he agreed to chair the Foundation's new national Senior Advisory Board, which brings together top executives from major U.S. corporations to offer advice and counsel on important matters facing the organization (see box).

Overview of the Senior Advisory Board

The Arthritis Foundation's Senior Advisory Board, chaired by Paul Volcker, is a group of national business leaders who advise the Foundation on issues of importance to the organization. In particular, its members are available to provide advice and counsel in the further development of the Foundation's corporate business plan.

In addition to Volcker, the members of the Senior Advisory Board are James M. Ballengee, former chairman of Enterra Corporation and now chairman of Morgan, Lewis and Bockius; Edward L. Hennessy, Jr., chairman of the board, Allied-Signal, Inc.; Paul F. Oreffice, chairman of the board, The Dow Chemical Company; William C. Steere, Jr., president, Pfizer Pharmaceutical Products; and T. A. Wilson, chairman emeritus of the Boeing Company.

Volcker describes the board as "a small group of people who want to associate themselves with the overall effort the Foundation is doing, "but in his customary modest style, he points out that the real work is going on down in the trenches by the thousands of local Arthritis Foundation volunteers throughout the country.

"What really impresses me," he says, "is the small group of people out there who really do the day-to-day work locally and keep after it year after year. They may not have been Chairman of the Federal Reserve Board, but many of them are businessmen with their own jobs and responsibilities who spend a lot time working with arthritis. They're the real heroes."

Looking to the Future

With a lifetime of public service behind him, what does the former Federal Reserve Chairman see in the future - for himself, for the country, for his wife and other Americans with arthritis?

All Volcker will say of his own future is that he has no expectation of returning to the government, but it's a safe bet that he will remain both a keen observer and an important player in the nation's economic well-being.

Right now, things are going pretty well with the nation's economy, he notes, at least on the surface. "We've had a long expansion. Of course, I always worry about inflation, so I worry about it now. It's getting a little worse, but by the standards of the late 1970s and early 1980s, it is still pretty much contained.

"Underneath that, we have some big deficits that you hear so much about. Basically, I wouldn't worry so much about the budget deficit if we saved a lot, but we aren't saving much in this country, and we're not investing as much as we should. Our basic growth rate has slowed down. We're consuming too much and saving too little. And we're borrowing a lot - both internally and from abroad. We're living for the moment in that sense."

Does that mean that the next generation is doomed to economic misery? Not necessarily. "I think we could continue to do very well if we do the right things," he says. "I'll let you be the optimist or the pessimist. Are we going to do more saving? Are we going to take care of some of these deficits? Are we going to be more efficient and more productive? There's no reason why we can't do all of these things, but we've been pretty sluggish about it so far. Are we going to turn inwards and be protectionist? We're tempted to do that, but if we do I don't think we're going to have very happy 1990s.

"The American people have not really faced up to these problems. If they face up to them, I would be very optimistic. If they refuse to, we're going to have some kind of a crisis. Then I'll get optimistic after the crisis, but it may be a very messy period to go through."

Volcker's message regarding the future for people with arthritis follows a similar theme: guarded optimism based on the importance of facing up to the problem. "If we want to do something about arthritis, we've got to be willing to support the research as necessary," he says, "and that includes adequate compensation for the scientists at the National Institutes of Health and elsewhere who are dedicating their lives to fighting this disease.

"It's going to be a long, hard road. All we can really say to people with arthritis now is they've got to stick with it. I'm sure they're tired of having people say that. But, with all the right pieces in place, maybe soon you people at the Arthritis Foundation or elsewhere are going to find some way of really curing the darn thing."

We certainly hope he's right on that forecast.

PHOTO : Paul Volcker's keen insights and forward-thinking strategies helped pull America out of the economic doldrums a decade ago. Now he is sharing his expertise with private businesses and causes, including the fight against arthritis.

PHOTO : "If we want to do something about arthriis we've got to be willing to support the research as necessary."
COPYRIGHT 1989 Arthritis Foundation, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1989 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Paul Volcker; includes related article
Author:McDaniel, Cindy T.
Publication:Arthritis Today
Date:Nov 1, 1989
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