Paul Volcker on the Financial Crisis

Sunday afternoon video:

Paul Volcker describes the financial crisis to the Joint Economic Committee of Congress on May 14, 2008 – 7 1/2 min excerpt.

Paul Volcker on the Financial Crisis

The Federal Reserve has taken extraordinary emergency measures in response to the current financial turmoil. Tonight, I spoke with Paul Volcker, former Fed chairman and one of the most respected figures on the economy, in an exclusive interview. Here is what he had to say about the collapse of Bear Stearns and the role the central bank has played

Volcker on Charlie Rose

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What's been said:

Discussions found on the web:
  1. Johnnyvee commented on May 18

    It’s refreshing to listen to someone without political concerns or an axe to grind.

  2. Steve Barry commented on May 18

    And Volcker predicted all this a few years ago, saying at the time there was a 3 in 5 chance of a financial or currency debacle in the U.S.

    I am posting the Citigroup Panic/Euphoria Model from Barron’s Online…I don’t think you need a subscription to view it. It is now sitting at +.54. I have watched this for years and this is an outlier of Euphoria. Amazing that it comes off the heels of a near financial meltdown. If this indicator fails here, we need to scrap it. A contrarian would be short off such a high reading.

  3. lcs commented on May 18

    Who beat the crap out of Charlie Rose’s face?

  4. day4night commented on May 18

    Note that Volcker supports Obama (as do I). Anyone think he’d be good as Sec of Treasury?

  5. DL commented on May 18

    Posted at 6:16 PM:

    “If this indicator fails here, we need to scrap it. A contrarian would be short off such a high reading”.

    I’ll second that. Just a bit more optimism from the options traders, and we should be set up for a nice leg down.

  6. Donny commented on May 18

    Why don’t we just start calling this what it actually is — a PONZI SCHEME!

    Furthermore — I hate the black helicopter crowd, and I sure the hell have never been so GD gloomy in my entire life, but something is wrong, very wrong.

  7. Stuart commented on May 18

    Of course it’s a ponzi scheme. The Fed now is allowing the banks to continue to securitize crap by acting a surrogate for those very same securitization markets that have shut down. The Fed is now buyer of last resort keeping banks on life support. It’s a huge ponzi scheme with the Fed now in the epicenter. Disgusting.

  8. poster commented on May 19

    for those of you fascinated by human behavior/psychology/”dear abby” self-help voyeurism….an apropos line from salon.com’s cary tennis re. money

    ***One tragic way we deal with fear of losing our money is, paradoxically, to keep spending. Rather than admit we are afraid of running out of money, we keep spending. Rather than admit we are afraid of being taken advantage of, we keep giving our money away. In this way, fear of the money running out makes the money run out.***

    Sounds like the U.S. consumer.

    My gut says bearish, the chart says bullish (until the trendline is broken)….so I guess the trade is to stay long Q’s/commodities with one hand firmly over the eject button.

  9. flow5 commented on May 21

    Monetarism involves controlling the volume of total reserves, not the volume of non-borrowed reserves as administered by Paul Volcker. This mis-guided procedure lead to the Fed’s ill-advised “abandonment of a reserves-based targeting procedure”.

    It is no happenstance that the FFR went to 22.4% under Volcker’s purview (the 79-83 non-borrowed reserves-based targeting procedure).

    The importance of controlling borrowed reserves is indicated by the fact that during Volcker’s reign, nearly 10% of all legal reserves were borrowed.

    And under his operating procedure, legal reserves grew at an astronomical 15% annual rate in the last 6 months of 1980.

    I.e., one dollar of borrowed reserves provides the same legal-economic base for the expansion of money as one dollar of non-borrowed reserves. The fact that advances have to be repaid is immaterial. A new advance can be obtained, or the borrowing bank replaced by other borrowing banks. Today, in contrast to Volcker’s experiment, the Central Bank, under Bernanke, utilizes only borrowed reserves.

  10. flow5 commented on May 21

    When Volcker was supposed to be controlling reserves he eliminated reserve surcharges in July 1980.

  11. flow5 commented on May 21

    Effective with the maintenance period beginning October 25, 1979, a marginal reserve requirement of 8 percent was added to managed liabilities in excess of a base amount. These liabilities included large time deposits, Eurodollar borrowings, repurchase agreements against U.S. government and agency securities, and federal funds borrowings from nonmember institutions. This marginal requirement was raised to 10 percent on April 3, 1980, lowered to 5 percent on June 12, 1980, and
    then ELIMINATED ALTOGETHER on July 24, 1980.

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