1. Paul Volcker is an important character in Goliath, because Volcker's job was to break the New Deal domestically so U.S. bankers could maintain their power abroad. And that's what he did.
2. I ran into Paul Volcker a few years ago at a conference when I was a Democratic Congressional staffer. He harangued me and said 'why are you Democrats so weak?' I wish I had responded, 'because you killed the unions.' Volcker was a good man, but he did very bad things.
3. Volcker's career is tied up with maintaining the dollar as the global reserve currency and protecting the Federal Reserve. He was a Treasury guy, and then a Fed person. In 1970, Nixon tasked him with overseeing the collapse of Penn Central, which was the Enron of its time.
4. The train system in the NE collapsed in 1970, bc of poorly structured regulations/labor contracts and corrupt management. The head of the Penn Central, which ran most of the rail lines, tried to gamble in real estate instead of putting capital "into the fucking railroad."
5. Volcker babysat the head of Penn Central as he begged for a government bailout. The Congressman in charge of the bailout - Wright Patman - said no. Volcker tried behind the scenes, though not very hard, to facilitate the bailout. Penn Central set off the chaos of the 1970s.
6. In 1979 Jimmy Carter nominated Paul Volcker to be the head of the Fed. Carter's advisor warned him, saying Volcker was the "candidate of Wall Street." Volcker's goal was to break unions and help bankers by keeping the dollar strong globally.
7. Volcker said that the prosperity of the 1950s and 1960s was a "hall of mirrors" and that the "standard of living of the average American must decline." He also organized Too Big to Fail using bailouts he had failed to get during the Penn Central bankruptcy.
8. In 1980, Nelson and Bunker Hunt, two oil billionaire heirs, tried to corner the silver market in league with Arab interests. Volcker organized a bailout, even as he was crushing workers, households, and small banks/businesses with excruciatingly high interest rates.
9. As economist Albert Wojnilower explained in 1980, “It is now everywhere taken for granted that no monetary authority will allow any key financial actor to fail."
That's Volcker's legacy. Destroying the middle class and socializing Wall Street.
That's Volcker's legacy. Destroying the middle class and socializing Wall Street.
10. Volcker in 1981 sought lower taxes and less government. "Taxes are themselves an element in costs, and high tax rates impair incentives . . . . [F]rom the standpoint of economic policy, the best way—and the only realistic way—to reduce the deficit is to cut expenditures."
11. Volcker opposed environmental and consumer protection rules. "We simply cannot afford regulatory or other policies that inhibit competition, add unnecessarily to costs or prices, or excessively
shelter some groups from economic risks of their own making.”
shelter some groups from economic risks of their own making.”
12. He derided economists of the 1950s/60s as "social philosophers" because they tried to organize growth equitably among all social groups. Volcker particularly targeted the auto sector, because it was the pace setting industry for high income growth for the middle class.
13. Volcker angered Reagan officials by keeping interest rates too high. When they complained he would pull “out his card on union wages” and note that inflation would not come down permanently until labor “got the message and surrendered.”
14. To repeat, Volcker walked around with a card of union wages in his pocket in the early 1980s to remind himself that his goal was to *crush the middle class.* That's what Volcker did.
15. Later on, in the mid-1980s, when the mergers and acquisitions frenzy was in full flower, Volcker tried to put a stop to junk bond corruption at the Fed. But he had killed all his possible allies. He repeated this error in 2009.
16. Like a lot of early neoliberals, Volcker wanted the rule of law and despised corruption, but he disdained democracy even more. Some sources if you want to know more. First of course there's Goliath, which frames Volcker in a larger ideological context. simonandschuster.com/books/Goliath/…
17. There's Judith Stein's remarkable Pivotal Decade: How America Traded Factories for Finance. amazon.com/Pivotal-Decade…
18. The Housing Crash and the End of American Citizenship. ir.lawnet.fordham.edu/cgi/viewconten…
19. Many people in finance have fond memories of an incorruptible Paul Volcker standing up against financial corruption and reigning in inflation. Which is true. But Volcker really wasn't on the side of democracy, and that's why he oversaw nothing but decline.
20. Two more book recs. @PeterContiBrown's Power and Independence of the Federal Reserve @jtepper2's Myth of Capitalism. Both will in different ways help frame where we are today in the context of how finance touches the economy.
