NEW YORK, May 6 (Reuters) - Paul Volcker, an adviser to President Barack Obama, warned in a letter to key Senators this week that audits of Federal Reserve policy would threaten its independence.
Paul A. Volcker, the former Federal Reserve chairman, has voiced some concerns about Senator Blanche Lincoln’s proposal to regulate the derivatives market much more tightly, saying that he is not in favor of forcing banks to spin off their derivatives operations.
In October 1979, under the Administration of Jimmy Carter, then-Federal Reserve Board Chairman Paul Volcker instituted a policy that he explicitly called "THE CONTROLLED DISINTEGRATION OF THE ECONOMY," as an extreme variant of the post-industrial society. Volcker began forcing upward the prime interest rate charged by commercial banks, so that by November 1980, the prime rate had reached 21.5%. Interest rates were held at double-digit rates for five years, through the end of 1984. As a result, in the period 1980-84, this killed off a layer of the U.S. manufacturing base, causing companies to shut down partially or completely. A surge of imports began, in order to replace the manufacturing capacity America had lost.
So, it seems that Volcker was saying some sane things a while back in an attempt to recover some credibility, in order to be better positioned to screw us.