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Former Federal Reserve Chairman Paul Volcker Dies

RACHEL MARTIN, HOST:

One of the leading political economists of the last century has died. Paul Volcker served as Federal Reserve chairman to Presidents Carter and Reagan and later as an adviser to President Obama. Volcker was perhaps the closest thing to a rock star economist as this country has ever seen. NPR's Yuki Noguchi has this remembrance.

YUKI NOGUCHI, BYLINE: Paul Volcker was a man of stature - literally. He stood over 6-foot-7 and towered over all the presidents he served under. His looming presence included a booming voice. Robert Kavesh, a longtime professor at New York University, befriended Volcker in 1949.

ROBERT KAVESH: The economic hero of post-World War II America - I would have to say that the biggest hero was Paul Volcker, and that's saying something.

NOGUCHI: Paul Volcker's biggest leadership moment came shortly after President Carter appointed him chairman of the Fed in 1979. The U.S. economy was in crisis. Stagflation, a highly unusual combination of both high inflation and low growth, gripped the nation. To address spiraling inflation, Volcker dramatically constricted the nation's money supply and let interests rise, which they did. The interest rates on a conventional mortgage soared to 17.5%.

Within two years, his plan worked. But it's hard to overstate how much the public reviled Volcker at the time. Unemployment increased, and Volcker was blamed for plunging the country into recession deliberately. Friends say Volcker privately worried about the impact of his policies, yet never wavered in his convictions. Here he is at a Senate Banking Committee hearing in 1981.

(SOUNDBITE OF ARCHIVED RECORDING)

PAUL VOLCKER: Ultimately, the only way that interest rates are going to be brought down and stay down over a period of time is to get the inflation rate down.

NOGUCHI: Paul Volcker was born in Cape May, N.J., and grew up in Teaneck, a well-off community where his father was city manager. Volcker believed that times of crisis give leaders more freedom to enact change. Here he was in a 1992 interview with NPR.

(SOUNDBITE OF ARCHIVED NPR BROADCAST)

P VOLCKER: Well, when you've been in government and public life a long time, you begin realizing there's something to the comment that many people make that it takes a crisis to move the United States government, and other governments aren't all that different.

NOGUCHI: As the recession deepened in the early 1980s, Volcker received death threats, so he had Secret Service protection. His son, James Volcker, reflected on that time.

JAMES VOLCKER: We read the papers at the time, and we knew that what he was doing and trying to do was not popular, obviously. And it - I think the entire family knew that this was one of the things that comes with public service.

NOGUCHI: Paul Volcker went back to Wall Street, then later came back to Washington as an adviser to President Obama during the Great Recession and during a time of great anger against big banks. The Volcker Rule, as it became known, eventually passed, restricting certain trades made by banks. If Volcker was the nation's most powerful moneyman for a number of years, his lifestyle was one that spoke of neither wealth nor power.

As chairman of the Fed, he lived in a tiny Washington apartment. He wore flimsy suits and smoked cheap cigars. His son says one of his greatest pleasures was making Thanksgiving dinner every year. In a 1982 People Magazine profile, his late wife Barbara joked that his government job as chairman of the Fed could no longer afford them nights out. Broadway tickets for two, at $20 apiece, were not in the budget. She took a bookkeeping job to make ends meet. When it came to household purchases, James Volcker recalls his father's bouts with buyer's remorse.

J VOLCKER: He agonized for a month after they bought the sofa that he could have gotten a better deal on another sofa, and it kind of drove my mom crazy, in a way. And she told me more than once, when you grow up, don't be a Volcker.

NOGUCHI: It was only after his 60th birthday that Volcker took his first big Wall Street salary. Volcker left public life for some time to care for his wife of four decades, Barbara Volcker, who suffered from diabetes. She died in 1998. Twelve years later, at the age of 82, Volcker married his longtime assistant, Anke Dening. Yuki Noguchi, NPR News. Transcript provided by NPR, Copyright NPR.