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Paul Volcker

Paul Volcker has broken the unspoken rule that former Federal Reserve chiefs don’t criticize their successors, said Michael M. Grynbaum in The New York Times. In two speeches last week, Volcker, who is credited with snapping the U.S. out of the economic doldrums in the 1980s, “chided the current chairman, Ben Bernanke, for toeing ‘the very edge’ of the bank’s legal authority in orchestrating last month’s bailout” of Bear Stearns. Bernanke, Volcker said, exercised “sweeping powers” in “a manner that is neither natural nor comfortable for a central bank.” He also took a subtle shot at Bernanke’s predecessor, Alan Greenspan. The “bright new financial system” that grew up during Greenspan’s tenure at the Fed, he said, “has failed the test of the marketplace.” Volcker also sniffed at Treasury Secretary Henry Paulson’s recently unveiled plan to ease financial regulation. Countries shouldn’t advertise their “regulatory laxity” to compete for business and investment, he said. The unusual remarks suggest that the biggest financial crisis in a generation has turned “the traditionally reserved” central bank “into an institution that seems to be in the throes of family therapy.”

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