Paul Volcker on Greedy Bankers, the Ryan Plan, and the Fed

Source: TDB/Newsweek

When Paul Volcker speaks, Republicans and Democrats, labor and business, listen. The former Federal Reserve chair consented to a rare and exclusive interview with Leslie H. Gelb, a frequent columnist for Newsweek and The Daily Beast. The 6-foot-7, 85-year-old, gruff, plain-spoken yet very careful Volcker had some blunt and important messages for government and banking leaders—and for all Americans.

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So what would you do on taxes?

To put it bluntly, we have to move more toward a consumption tax. There are different ways you could do that, but that’s what we ought to be doing.

Would you get rid of the Bush tax cuts?

In the short run, you’ve got to deal with your income taxes. You can do that either by repealing the Bush tax cuts, at least for some people, or by rearranging the exemptions and loopholes, all those things people talk about adopting, something along the lines of Simpson-Bowles.

How has Obama done in handling the economic recovery?

Everybody thinks it would be nice if the administration were more effective in promoting a balanced package on taxes and spending. The problem is that the political system has been so ideologically divided, and the congressional situation is such that it’s been hard to get any degree of consensus on any sensible program.
Did Obama do enough to promote a bigger stimulus package?

He took about as much stimulus package as he thought he could get away with at the time, and it was very substantial. And when Congress got on it, they did a lot of things to meet political desires rather than economic efficiency and speed of disbursement. I don’t have any big criticism of the administration not pushing hard enough on the overall volume. They did what they could.

Has Treasury Secretary Tim Geithner done enough to deal with the housing mess?

Housing was less susceptible to a quick emergency fix than the banking area. You have too many mortgages out there at values not supported by the value of the house itself. Ultimately you can say forgive a lot of the mortgages, but to write off and make a choice on which mortgages are bad is extremely difficult. I haven’t seen any convincing answer for how to clear it up more rapidly.

What do you think of the Ryan plan?

I am no budget expert, but what I sense is that it’s left a lot of things open and kind of a wing and a prayer. I don’t think it answers all the questions; let me put it that way. If it’s not going to raise taxes anyplace, it doesn’t seem to me it can be adequate.

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Read more: http://www.thedailybeast.com/newsweek/2012/09/16/paul-volcker-on-greedy-bankers-the-ryan-plan-and-the-fed.html