Word: volckerism
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...Paul Volcker, 6 ft. 7 in., has a reputation for towering over his adversaries, even tough ones like inflation and political pressure. Last week the Federal Reserve Board chairman came out on top again, this time in a policy struggle with his colleagues on the board. Early in the week it was revealed that the group had outvoted him 4 to 3 on a key decision to lower interest rates, an indicator that Volcker's control over the board might be slipping. But only a few days later Volcker's most powerful sparring mate on the board, Vice Chairman Preston...
Until this year, the board was dominated by governors who supported Volcker's strategy of maintaining relatively tight credit to keep inflation at bay. The Volckerites held sway over two members appointed by President Reagan --Martin and Martha Seger--who often wanted to push the economy faster. But in January Reagan named two more members: Wayne Angell, a Kansas banker and economics professor, and Manuel Johnson, a former Assistant Treasury Secretary. That put the Reagan appointees, whom economists dubbed the "Gang of Four," in the majority...
...rift opened Feb. 24, when Martin and Seger pressed the board to vote on a proposal to cut the discount rate, the interest that the Federal Reserve charges member banks for loans, from 7.5% to 7%. Volcker urged the board to postpone the cut because he was trying to persuade other industrial countries to drop their interest rates first. He feared that if American rates fell too fast, foreign investors would pull money out of the U.S. and send the dollar into a free fall...
When the board voted to make the cut anyway, many Federal Reserve staffers thought that Volcker might resign. But Newcomer Angell went to the chairman's office a few hours later and suggested a compromise. By the end of the day, the board assembled again at its dark mahogany table and suspended the rate cut so that Volcker could have more time to confer with foreign officials. Less than two weeks later, after West Germany and other countries had reduced their interest charges, the board unanimously voted to lower the discount rate...
...shape up their economies. But last week several Latin countries sent out new distress signals. Mexico's Finance Minister Jesus Silva Herzog, whose country's financial condition has been devastated by falling oil revenues, rushed to Washington to seek aid in closed-door meetings with Federal Reserve Chairman Paul Volcker, Secretary of State George Shultz and Treasury Secretary James Baker. Meanwhile, Peru suddenly withdrew its gold, silver and cash reserves from U.S. banks to prevent any effort by Washington to freeze them. When foreign ministers and finance chiefs from five major debtors--Brazil ($104 billion), Mexico ($97 billion), Argentina...