The time has come for change to America's financial regulatory agencies, former Federal Reserve Chairman Paul Volcker said Wednesday in a speech he gave at a luncheon held by the Economic Club of New York.
Volcker, who attended the luncheon held at the Hilton Hotel in Midtown Manhattan to accept an award for leadership and excellence, addressed the need for regulatory reform and to improve the public’s trust in government. He argued against the idea of the Fed’s “dual mandate” to lift employment while containing inflation.
When asked about the Fed’s dual mandate, Volcker stated clearly that a focus on inflation trumps all other pursuits, arguing the goal of the central bank should be to safeguard the currency.
“I think that is the basic responsibility: (the) central bank is in charge of the currency, and the responsibility is for a stable currency,” Volcker said. “…[W]hat we’ve got to do is get prices stable and that will be good for employment. That will be good for stability. And I think that’s the message that ought to be given."
The former Fed chief, who led the central bank from 1979 to 1987, said inflationary concerns are “well contained for the time being.”
Volcker also targeted the U.S. financial regulatory system for policies that are creating a loss of faith in government by the public. In a press release put out earlier on Wednesday, Volcker announced he was launching The Volcker Alliance, a nonpartisan initiative to work toward “effective execution of public policies and to rebuild public trust in government.” Volcker’s foundation is intended to back studies on enforcement of policies and regulations.
“As we go along now, forget about great monetary policy, this regulatory system is a mess,” Volcker said in response to a question about Dodd-Frank legislation and the implementation of the eponymous “Volcker Rule,” designed to separate banks' consumer lending and proprietary trading units. “We know it’s a mess but we shrug our shoulders and we can’t do anything about it. So I’m looking for some way to get through that.”
In his prepared remarks, Volcker also alluded to the need for this restoration of public faith in government.
“The erosion of confidence and trust in the financial world, in the financial authorities that oversee it, and in government generally is palpable,” Volcker said. “That can’t be healthy for markets or for the regulatory community. It surely can’t be healthy for the world’s greatest democracy, now challenged in its role of political and economic leadership.”