“Wall Street’s octogenarian nemesis”, former US Federal Reserve Chairman Paul Volcker has been at the heart of some of the biggest events in global economics for the past 40 years, and will not shy away from plain speaking at the ICAS Conference later this year.
Paul Volcker is softly spoken and prone to a chuckle –
generally a wry chuckle, directed at those who seek to criticise his views.
He is also intent on causing immense damage, or bringing
some sense to global banking, depending on who you listen to.
Both views tend to centre on the famous (infamous?) Volcker
rule, proposed as part of the 2010 Dodd-Frank act, which bans banks receiving
federal aid from proprietary trading.
By the time he speaks at the ICAS Conference in September,
the Act will be fully in place, if all goes according to plan; it is due to
take effect in July.
Ahead of this banks have launched a fierce campaign of
lobbying against the rule. They are afraid it will curtail ordinary trading,
not merely proprietary trading.
“It stops them from
doing speculative trading,” Volcker told American journalist and commentator
Bill Moyers in a recent interview .
“And when I talk to the people on the street [...] I say, ‘Is
it appropriate [...] that the banks that are protected by the US should engage in
speculative trading when they’re effectively subsidised using your deposits to
“And they all cheer and say ‘course not!’ I mean, it’s just
kind of common sense.”
Volcker maintained that the kind of trading his rule seeks
to outlaw affects the culture of the institutions involved and pitted the
interests of the banks in opposition to those of their customers.
“It’s clear that this activity almost inherently creates
conflicts of interest […] but this is a conflict of interest not between two
customers, but a conflict of interest between the bank making money and its
“There’s no doubt that since the repeal of Glass-Steagall
[the act, which set up a regulatory firewall between commercial and investment
banking, was repealed in 1999] this has become a big business for a half a
dozen big banks.
“These risks were a contributing factor in some of the
difficulties in the financial system. But during the collapse of the system
some of the investment banks decided they better get a banking licence, and the
government gave them a banking licence, so they now have access to the
government support, and that’s part of the problem – they like it.”
“I’m sure what looms in the minds of a lot of people is that
if push comes to shove, they’ll be rescued, one way or another.”
The Dodd-Frank claims to rule out bail-out of banks, but as
Volcker admitted, “It’s never been tested.
“Human greed isn’t going to go away, but you can put some limitations
on it, that’s for sure!”
Educated at Princeton, Harvard and the London School of Economics, Volcker has been
a towering presence – literally and figuratively; he stands six foot eight
inches tall – in US economics and banking for over 30 years.
The chairman of the US Federal Reserve from 1979-1987,
Volcker served under US Presidents Jimmy Carter and Ronald Reagan. Before that
he was central to America’s decision to come off the gold standard in 1971.
ICAS President Sir David Tweedie has a long-standing
relationship with Mr Volcker and they have worked together on international
accounting. Volcker himself is a huge
advocate of IFRS in the US. Sir David
describes him as “one of the toughest and best Chairmen he has come across. “
“He squeezed inflation out of the US economy,” said Sir
David. “He is a hero in America, praised for saving the economy.”
Volcker is also known in the US as the ‘white knight of
Andersons’ after he was called in (too late as it happened) to save it.
“Paul’s view was that the tone at the top was wrong”, said
Sir David. “Paul understands the
importance of tone at the top, a vital requirement for a successful,
transparent and ethical business.”
He was appointed chairman of President Barack Obama’s Economic Recovery Advisory Panel in 2009. It was in
January 2010 Obama announced the Volcker Rule; “after this tall guy behind me”,
as he said at the time.
The controversy about his eponymous rule is not Volcker’s first. During his time as Fed Chairman, he was credited with
reducing the US rate of inflation from an average rate of 12.8 per cent in 1979
and 1980 to an average rate less than one third of this for the five years
before his departure. During his tenure he also resisted several White House
efforts at deregulation of financial markets.
At the time of his departure he indicated to Reagan that he
did not wish to be appointed to his position. It was reported at the time that
although Reagan officially accepted Volcker’s resignation “with great
reluctance and regret”, attempts to get him to reconsider his decision to
resign were minimal.
Volcker’s plain-speaking, take-no-prisoners approach was
also evident when he was asked by the UN to
investigate the Iraqi Oil-for-Food program in 2004.
His report, published in 2005, was highly critical of the
role of Kojo Annan, son of then UN Secretary General Kofi Annan, and of UN
handling of the program.
In various roles in the world of accounting, Volcker has
been equally outspoken. He was quoted by ‘CFO’ magazine in 2009 making the case
for world-wide movement toward accounting standards under the IASB.
“I do think we ought to be working toward international
accounting standards and have them standard around the world under the general
aegis of the International Accounting Standards Board, and there's been a lot
of progress in that direction,” he said.
His view was expressed on the same day SEC Chairwoman Mary
Schapiro, testifying to the US Senate at her confirmation hearing, said she had concerns about the IFRS standards in general.
Earlier this year Volcker appeared to came out in favour of audit rotation at a Public Company Accounting Oversight Board roundtable event.
He was quoted by Reuters as
saying “It does seem to me that regular audits should not become a sort of
long-term annuity for the accounting firm paid for by the company being
audited, rather than being responsive ... to the investing public"
He has not been sparing in his criticisms of banks’
responses to the financial crisis.
“Has there been one financial leader standing up and saying,
‘This is really excessive’?,” Volcker was quoted by the New York Times as
asking a conference rooms of senior bankers. When the audience didn’t reply,
Volcker was blunt: “Wake up, gentlemen. Your response is inadequate.”
Attendees at the ICAS Conference can expect similarly
forthright views. Volcker is also unlikely to hold back about the issue of
Asked in the 2010 documentary ‘Inside Job’ what he thought
about Wall St incomes, Volcker’s answer was simple: “excessive”.
He has spoken out against financial innovations, the
benefits of which he has questioned, and urged reforms that place commercial
banking at the centre of the global financial system.
“If that breaks down then you have an enormous crisis,” he told journalist Charlie Rose for Bloomberg’s Business Week.
“And commercial banks have expanded into areas I don't think
are so central.
“I would cut back their so-called capital market
activities—hedge funds, equity funds, commodities trading, trading in
derivatives. They're all legitimate functions, but they're not so central.
“We don't need to regulate the capital markets so heavily.
You have some extreme cases where individual institutions are so big and so
vulnerable, yes, you might want some regulation of capital and leverage, but
that would be the exception. But if they fail, let 'em fail.”
Paul Volcker, economist and former US Federal Reserve
Chairman under Presidents Jimmy Carter and Ronald Reagan and former Chairman of
the Federal Economic Recovery Advisory Panel under President Barack Obama will
deliver an address to the ICAS Conference, kindly supported by Hays Senior Finance and Camargue Group, at Gleneagles in Perthshire on 20-21 September.
Other speakers include Sir David Tweedie, President of ICAS
and former Chairman of the International Accounting Standards Board, Alex
Polizzi, star of TV show ‘The Fixer’ and business development expert Chris
To find out more about the ICAS Conference and to book your
place, click here.