Obama names Volcker to head panel on reviving economy

President-elect Barack Obama named former Federal Reserve Chairman Paul Volcker to head a new White House economic board that will propose ways to revive growth as the US grapples with an “economic crisis of historic proportions.”

“At this defining moment for our nation, the old ways of thinking and acting just won’t do,” Obama said at a news conference in Chicago, his third in as many days.

Volcker, 81, will be chairman of the President’s Economic Recovery Advisory Board. The panel’s top staff official will be Austan Goolsbee, a University of Chicago economist who will also be a member of the president’s Council of Economic Advisers.

The panel, which will include experts from outside government, will meet about once a month and periodically brief Obama with advice on how to shore up financial markets. Volcker’s position will be part-time.

“Sometimes policymaking in Washington can become too insular,” Obama said. “The walls of the echo chamber can sometimes keep out fresh voices and new ways of thinking, and those

who serve in Washington don’t always have a ground-level sense of which pro-grammes and policies are working.”

Volcker, who throttled the economy to crush inflation in the 1980s, was an adviser to Obama during the presidential campaign. He was a candidate for Treasury secretary, a job that went to Federal Reserve Bank of New York President Timothy Geithner.

Volcker was appointed Fed chairman in August 1979 as the US experienced a “crisis of confidence” under President Jimmy Carter.

With the president hobbled by a hostage crisis in Iran, long lines at gas stations and inflation of more than 10 per cent, Volcker unleashed interest rates and began to clamp down on the quantity of money in the banking system.

Volcker has voiced his contempt for Wall Street’s risk- management and is likely to come to the job ready to impose tougher restrictions.

Banks have taken at least $685 billion in credit losses and write downs in a crisis that began with soaring default rates on high-risk mortgages and ended up redrawing the entire US financial landscape.