Updated at 10:30 a.m. ET
Former Federal Reserve Chairman Paul Volcker, the closest thing to a rock star economist this country has seen, died Monday at 92, NPR has confirmed. He reportedly had prostate cancer.
It has been more than three decades since Volcker stepped down from the Fed. And it's a safe bet that many younger Americans do not even know his name.
Here's how Robert Kavesh, a professor at New York University, remembers his lifelong friend: "The economic hero of post-World War II America I would have to say was Paul Volcker. And that's saying something."
Indeed. Volcker's leadership moment came shortly after President Jimmy 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 rising unemployment — gripped the country.
To address spiraling inflation, Volcker dramatically constricted the nation's money supply and let interest rates rise. The interest rates on a conventional mortgage soared to more than 18%.
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. Many say he ruined Carter's reelection chances. Ads pointed out Volcker's middle name was Adolph, insinuating similarities to Adolf Hitler.
Friends say Volcker privately worried about the impact of his policies, yet never wavered in his convictions.
"Ultimately, the only way I think that ... interest rates will be brought down and stay down is to get the inflation rate down," he said at a Senate Banking Committee hearing in 1981.
Janet Yellen, who served as Fed chair from 2014 to 2018, said Volcker "embodied the values we hold most dear: devotion to public service, the courage to do the right thing, even when it's immensely unpopular."
Yellen credited him with "taming inflation and ushering in a long period of macroeconomic stability."
Ben Bernanke, who preceded Yellen as Fed chairman, echoed her sentiments in remarks to The New York Times. He told the Times that Volcker "personified the idea of doing something politically unpopular but economically necessary."
Volcker was born in Cape May, N.J., and grew up in Teaneck, a well-off community where his father was city manager.
He was a man of stature. Literally. He stood over 6-foot-7 and towered over all the presidents he served under.
Volcker believed that times of crisis give leaders more freedom to enact change.
"Well, when you've been in government and in public life a long time, you begin to realize you need a crisis to move the United States government, and other governments aren't all that different," he said in an NPR interview in 1992.
As the recession deepened in the early 1980s, Volcker received death threats, so he had Secret Service protection.
"We read the papers at the time and we knew what he was doing and trying to do was not popular, obviously," his son James Volcker said. "And I think the entire family knew that this was one of the things that comes with public service."
James Volcker, who was born with cerebral palsy, says his parents were not ones to shy away from hardship. At a time when many with his disease were kept out of the public eye, he says his parents encouraged him to live in what he calls the "able-bodied world."
Paul Volcker's tenure as Fed chairman lasted eight years, until 1987. He returned to Wall Street and then came back to Washington as an adviser to President Barack Obama in the aftermath of the worst financial crisis since the Great Depression.
During that time, he proposed a measure, which became known as the Volcker Rule, that sought to reduce the risk big banks posed to the economy by curbing their ability to trade their own funds speculatively. It took years for the Volcker Rule to be implemented and it was watered down along the way, but it is still part of the regulatory overhaul known as Dodd-Frank. In 2017, President Trump ordered the rule to be rewritten to further soften its impact.
If Volcker was the nation's most powerful money man 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 Fed chairman — could no longer afford them nights out. Broadway tickets for two — at $40 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. "He agonized for a month after they bought the sofa that they could have gotten a better deal on another sofa. It kinda drove my mom crazy, in a way. And she told me more than once, 'When you grow up, don't be a Volcker! ' "
It was only after his 60th birthday that Volcker took his first big Wall Street salary.
The late Fed historian Allan Meltzer said history has vindicated Paul Volcker's policy stands. Meltzer said Volcker will be remembered for his rare combination of economic acumen and his ability to defend his principles against fierce political criticism.
"I think he's regarded as one of the stellar people of his generation," Meltzer said.
Volcker left public life for some time to care for his wife of four decades, Barbara Volcker, who had diabetes. She died in 1998. Twelve years later, at the age of 82, Volcker married his longtime assistant, Anke Dening.
He is survived by Dening and his children.
ARI SHAPIRO, HOST:
For an economic rock star, there was nothing flashy about Paul Volcker. His public service spanned six decades, including some difficult economic times. In the 1980s, he was chairman of the Federal Reserve. He died yesterday at the age of 92, and NPR's Yuki Noguchi has this remembrance.
YUKI NOGUCHI, BYLINE: Paul Volcker was best known for his leadership in times of crisis and for taking unpopular stands that later proved him right. First, in the early 1980s, as chair of the Fed, Volcker thought rising inflation. He took the unprecedented step of jacking up interest rates as high as 20%, a move that put houses and cars out of reach for many. This made him profoundly unpopular. Volcker received death threats, but stood firm. Jeffrey Bergstrand was an economist with the Fed at the time.
JEFFREY BERGSTRAND: It took an immense amount of courage to stay the course to raise interest rates, knowing really in the back of his mind this has got to cause a recession.
NOGUCHI: Within a few years, Volcker's plan worked. Inflation fell. And in the process, Bergstrand says, Volcker and the Fed became known for their independence and for taking tough-but-necessary stands, a legacy that endures today. Volcker had a towering persona, quite literally, standing tall at 6-foot-7. But for a man who devoted so much of his time thinking about money, he led a famously modest life. That combination of qualities inspired generations of other economists like Sarah Bloom Raskin.
SARAH BLOOM RASKIN: At the time, he was living just in a one-bedroom apartment and presumably made his spaghetti dinners from a little hot plate.
NOGUCHI: Raskin later served as a governor at the Federal Reserve. As a 19-year-old college student, she watched Volcker testify in 1982, at the height of his unpopularity.
BLOOM RASKIN: I had an internship at the Joint Economic Committee, and he was testifying. And I remember just being entranced by the whole notion of what he was talking about.
NOGUCHI: Raskin followed him into the field. She hoped to emulate his understanding of how economic policies affect real life. Later, Raskin worked with Volcker during the financial crisis. During that time and following the Great Recession, Volcker proposed restricting certain risky trades to make the banking system safer, something now known as the Volcker Rule.
BLOOM RASKIN: And it was not popular. And again, it would take somebody like Paul Volcker to put it forward.
NOGUCHI: Paul Volcker is survived by his second wife and two children.
Yuki Noguchi, NPR News, Washington. Transcript provided by NPR, Copyright NPR.