When Paul A. Volcker retired as chairman of the Federal Reserve Board last summer, businessmen and financial experts all over the world felt the Reagan administration had carelessly discarded a prized asset, one of its few claims to economic credibility.
More than any other Washington official, Volcker inspired confidence and trust. As a Swedish banker told me in 1983, when Reagan was mulling over a second term for Volcker: ''Paul is worth 100 points on the Dow Jones index.'' (In 1983, 100 points on the Dow meant something!)
Now, one hears ''bring back Volcker'' sentiment on Wall Street. In a desperate desire for a quick fix to the nation's economic troubles, some suggest Volcker be draftedto replace Treasury Secretary James A.Baker III -- who, incidentally, successfully lobbied for Volcker's 1983 reappointment to the Fed when Baker was White House chief of staff.
Volcker's return to Washington at this time is politically unrealistic. Even if it were possible, it would be counterproductive, undercutting the authority of his successor at the Fed, Alan Greenspan. And Greenspan's leadership at the central bank -- easing money -- has been the one positive element in an otherwise shaky government performance since the stock market crash.
What is needed in Washington is not a shuffle of personalities, but the adoption of mature policy. That means a quick move to restore fiscal sanity through a significant budget reduction. At the moment, the only ''policy'' is a nonpolicy: a willingness by the Reagan administration to let the dollar fall.
Unless Reagan helps promote a decent budget package by going along with a tax increase (as Baker is urging him to do), Greenspan eventually will have no choice but to abandon the easy-money policy in order to prevent a collapse of the dollar. That might push the nation into a deep recession. Volcker, were he still at the Fed, would be doing the same things Greenspan is doing.
It should be made clear that Volcker has not been inspiring the notion that he rush back to Washington. As Leonard Silk reported in a New York Times magazine profile last Sunday, Volcker says a loud ''No'' to Baker's job. But until Volcker accepts private-sector employment, the theoretical possibility that he may be available for this or that ''special assignment'' in Washington will keep the rumor mills going.
Rather restlessly, Volcker has been exploring the many offers from financial institutions and academia while sitting in a Third Avenue office in New York loaned him by investment banker Geoffrey Bell.
''I haven't decided what I want to do when I grow up,'' he joked the other night at a reception honoring the memory of the late Arthur Burns. I take this to mean that no investment-banking firm, bank, brokerage house or other financial company has come up with an offer with which he is totally comfortable. His close friends tell him not to worry, to enjoy life and take another couple of months to make up his mind.
Volcker is not opposed to making money. But to him, making money is a necessary means to an end, not an end in itself. In the present situation, he probably would prefer taking an academic chair as his ''main'' occupation -- rather than a high-paying advisory post with one of the big investment houses -- and supplementing his income with a handful of corporate board directorships.
But a unique talent such as Volcker's won't be ignored, especially in one as committed to public service. In a recent speech, Felix Rohatyn of Lazard Freres suggested that Volcker and former West German chancellor Helmut Schmidt head a new group of ''wise men'' commissioned to draft an agenda for an international monetary conference, a` la Bretton Woods, to deal with the problems of the dollar, capital movements and the role of the World Bank.
In retrospect, it's a pity that Volcker didn't take the World Bank presidency when he could have had it, more than a year ago, prior to the designation of Barber Conable. At that time, I suspect, Volcker was still entertaining the possibility that the Fed job could be his for a third term.
Volcker wasn't reappointed to a third four-year term at the Fed for reasons never fully explained. My own hunch is that if Reagan really had wanted to keep him at the Fed -- and had said it was urgent for him to stay on -- Volcker would have done so, even over his wife's objections. But if any such signals were sent by Reagan's representatives or by Volcker, they either weren't received in time or weren't correctly interpreted.
Clearly, Volcker relished being chairman of the Fed. One can question some of his policy moves in an eight-year span, but overall he performed well. One can imagine him returning to Washington at a later date as president of the World Bank or as secretary of the Treasury in a new administration, which, in January 1989, is likely to be confronting horrendous economic problems.