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Paul Volcker on Greedy Bankers, the Ryan Plan, and the Fed

Author: Leslie H. Gelb, President Emeritus and Board Senior Fellow
September 17, 2012
Newsweek

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When Paul Volcker speaks, Republicans and Democrats, labor and business, listen. The former Federal Reserve chair consented to a rare and exclusive interview with Leslie H. Gelb, a frequent columnist for Newsweek and The Daily Beast. The 6-foot-7, 85-year-old, gruff, plain-spoken yet very careful Volcker had some blunt and important messages for government and banking leaders—and for all Americans.

Gelb: Are the troubles in banking and finance—the illegal trading, the possibly illegal LIBOR-rate setting, the sky-high risk taking, the supposed difficulties bank heads have being able to control their subordinates—really something new?

Volcker: I believe it is something new in degree. I say that with some reluctance, thinking maybe it's just that I'm an old man and didn't know what was going on before. But I am struck by the number of not just friends but other observers who share the belief that there has been a real change in the mental approach of people in markets. They used to be more customer-oriented, with some sense of fiduciary responsibility that's been very much reduced into an impersonal, "you're a counterparty, you're not a customer" caveat emptor.

That attitude lies behind a lot of these difficulties and has been spurred by enormous changes in compensation practices that have tempted people to cut corners. I'm afraid that the temptation now becomes greater—that if I can, as they say, cut some corners, maybe I'll get some of this magic dust myself in proportions that seemed unimaginable a few years ago.

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