Paul Volcker's Response To The Financial Crisis

Paul Volcker began his professional career in 1952 joining the staff of the Federal Reserve

Bank as a full time economist. From there he held many different positions dealing with the

financial economy such as a financial economist with the Chase Manhattan Bank, director of

financial analysis at the Treasury Department, deputy under-secretary for monetary affairs. He

returned to Chase Manhattan Bank as vice president and director of planning in 1965. And from

1969 to 1974, Volcker served as under-secretary of the Treasury for international monetary

affairs. With all of this experience had has been able to influence monumental change in the

history of our economy.

Volcker was appointed chairman of the board of governors for the

Volcker left the Federal Reserve in 1987 but continued his career at a prominent New

York investment banking firm.

Recently, Volcker was an economic advisor to President Barack Obama, heading the

President's Economic Recovery Advisory Board. During the financial crisis, Volcker has been

extremely critical of banks, saying that their response to the financial crisis has been inadequate,

and that more regulation of banks is called for. Specifically, Volcker has called for a break-up of

the nation's largest banks, prohibiting deposit-taking institutions from engaging in riskier

activities such as proprietary trading, private equity, and hedge fund investments. This idea was

the foundation of the “Volcker Rule”. In January of 2010, President Barack Obama proposed

bank regulations which he dubbed "The Volcker Rule," in reference to Volcker's aggressive

pursuit of these regulations. The proposed rules would prevent commercial banks from owning

and investing in hedge funds and private equity, and limit the trading they do for their own

accounts.

Many of the hedges that banking entities enter into-namely, long-term hedges-will not be

prohibited by the Volcker Rule in the first instance and thus will not need to meet the