Word: volckerism
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...authority, Volcker's celebrated powers have gradually been waning at the Federal Reserve. Populist supply-siders in the Reagan Administration have never been happy with Volcker's austere monetary views. Neither, until his own departure in February, was former White House Chief of Staff Donald Regan. As members of the Reserve Board have resigned, retired or fulfilled their 14-year terms, the Administration has gradually replaced them with appointees who have favored more expansionary policies. Reserve Board insiders insist that relations between Volcker and the newcomers never deteriorated into antagonism. But, says one, "he obviously didn't have the control...
...sign of the change is that Volcker went along with a gradual reorientation of Fed policy toward pepping up economic growth. In 1986 the Reserve Board let the basic money supply grow at a 16% annual pace, far above Volcker's original target limit of 8%. That money spurt, along with the weakening dollar, has let inflation edge up this year and may have sown the seeds of future rises that could nullify part of Volcker's celebrated victory against spiraling prices...
Knowledge of the underlying tension at the Fed led many to speculate last week that Volcker had been squeezed out of his job. The outgoing Fed chairman tried to squelch the gossip at President Reagan's press conference announcing the Greenspan appointment. Said Volcker: "I had no feeling that I was being pushed." On the other hand, Treasury Secretary James Baker muddied the waters slightly with an assertion that several attempts had been made "at my level" to get Volcker to stay on for a third term. The implication could be -- and was -- drawn that Reagan himself had declined...
...process of Volcker's departure actually began in March, immediately before Washington's annual Gridiron Dinner for an elite roster of media figures and politicians. Newly appointed White House Chief of Staff Howard Baker, a longtime Volcker supporter, bumped into the Fed chairman at a reception. Said Volcker: "Howard, I guess it's about time I came over and talked to you and the President." Baker's reply: "That's fine." He invited Volcker to set an appointment anytime to discuss his future...
...Volcker called on May 19 to ask for a meeting that was set for seven days later. The get-together was originally scheduled for Baker's office in the White House West Wing, but the Fed chairman did not want to be spotted entering the building. Instead, he asked Baker to travel to his own Constitution Avenue headquarters, and to use the garage entrance. When the chief of staff arrived, Volcker quickly passed on the news: "I don't want to be reappointed." Baker's reaction was, "The President will be disappointed." He tried to get Volcker to reconsider. "Paul...