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A Blue-Ribbon Adviser With a Gray-Area Role
Volcker Unsure of His Impact on Economic Policy, Sources Say

By David Cho and Lori Montgomery
Washington Post Staff Writers
Wednesday, May 20, 2009

Weeks after winning the White House, President Obama sought to reassure a nation unnerved by a financial meltdown that Paul A. Volcker, the venerable former Federal Reserve chairman, would help the new economic team steer a course through the crisis.

Six months after that announcement, however, Volcker has had sporadic contact with the president, and his role in the administration remains unclear, according to sources with direct knowledge of his thinking. As the economic recovery board he chairs holds its first substantive meeting today, Volcker is unsure what influence the panel ultimately will have, the sources said.

"Anybody in the world doing the creation of policy would be well advised to talk to him," said James D. Wolfensohn, a former World Bank president who is close to Volcker. "I have the impression that part of the purpose of the committee and the appointment of Paul is to make him available for that interchange. What I don't know is how much he's being used."

White House officials acknowledged getting off to a slow start, but said the panel is among the most influential advisory boards in Washington.

"At the beginning, everyone was frustrated. It was a hurry-up-and-wait kind of thing," said Austan D. Goolsbee, a member of the president's Council of Economic Advisers. "But we largely got through that in January, and now people are having interesting influences all over the place."

Yesterday, the White House released a statement on Volcker's behalf, saying that his advisory board "is at work, addressing a variety of issues before the still new administration." The statement added that "we all have our hands full" and "look forward to working with President Obama and his economic leadership in the months ahead."

But sources close to Volcker said he remains uncertain about both his and the board's ongoing role in the administration. Reached in his office in New York, Volcker declined to elaborate on the matter.

Since the election, Volcker has stood out among Obama's economic advisers. At 81, he is from a different era than the others. He led the fight to rejuvenate the U.S. economy after the high inflation of the 1970s. A Democrat who was appointed Fed chairman in 1979 by President Jimmy Carter and reappointed in 1983 by President Ronald Reagan, he has devotees in both major parties.

So far, however, Volcker has not been able to gain broad influence over the issues he cares about most, the overhaul of the financial system and the financial rescue initiative, sources close to him said. Those issues are dominated by Treasury Secretary Timothy F. Geithner, whose office is next door to the White House, and Lawrence H. Summers, director of the National Economic Council, who works down the hall from the Oval Office.

Unlike other prominent members of Obama's team, Volcker does not have a long relationship with the president. He came to Obama's attention after showing up at an early campaign event in Washington in 2007. When word reached Goolsbee, then a campaign adviser, that the former Fed chairman had expressed an interest in Obama's books, Goolsbee rushed to New York to court him.

"It was clear he was intrigued by Obama, but he said he was no longer involved in electoral politics," Goolsbee recalled. "So I just started talking to him. I told people we don't need to raise money off this guy. We need to pick his brain."

In January 2008, Volcker endorsed Obama, saying the senator had "the potential for strong and fresh leadership." By summer 2008, as the economic crisis was coming into full view, Goolsbee said, Obama began talking to Volcker directly and seeking his advice in late-night calls as the campaign struggled to respond.

The President's Economic Recovery Advisory Board was intended to continue that relationship, Goolsbee said, and to give Volcker a platform from which to provide independent advice and an outside-the-Beltway perspective to the new administration. But its mission has since expanded to include a range of topics that are far from Volcker's primary interests. And its distance from the Beltway can make it difficult to have an impact inside the West Wing.

"It is not at all clear . . . that the board will have influence," said one board member familiar with Volcker's thinking. "The different members have their own opinions that they want to express, but not much interest in a cohesive board view."

The economic recovery board was modeled after an intelligence panel established during the Eisenhower administration. Obama announced its creation at his second news conference as president-elect, promising that the panel would advise the president as he "formulates and implements his plans for economic recovery."

For weeks, there was nothing more. The rest of the board -- a collection of corporate leaders, labor officials and prominent economists -- was finally named in February. Even then, the panel had virtually no public profile and an ill-defined mission. Last month, Volcker complained to the Wall Street Journal that "the whole organizational side of this has been a nightmare."

But behind the scenes, several members said the panel was beginning to coalesce. The group split into subgroups focused on financial markets and regulation, housing, jobs, the green economy, savings and retirement, and later, tax reform. Members of the subpanels began having "ad-hoc conversations with each other and with the administration, and getting an understanding of where we add value," said Robert Wolf, chairman of UBS Group Americas, who serves on subpanels related to financial markets and job creation.

Since then, Wolf and others said, panel members have had direct conversations with the president, Summers, and White House advisers David Axelrod and Valerie B. Jarrett, as well as one another. "I would say the last month and a half, the calls have been quite energetic," Wolf said.

The full panel will convene for the first time today at the White House to discuss energy and jobs.

Said board member William H. Donaldson, a former Securities and Exchange Commission chairman: "Time will tell whether there's frustration here. And time will tell . . . what impact we'll have."

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