'We don't know how deep it's going to be,' said Mr Volcker, whom President-elect Barack Obama has appointed to chair the President's Economic Recovery Advisory Board.
'Crises are old but this crisis is different. It's different in its enormous complexity; it's certainly different in the massive intervention of government. It's more global in scope than any previous crises.'
He said much needed to be done to restore confidence, integrity and fiduciary responsibility and the process of reordering the financial world would not be a quick one.
'But I like to think the crisis is an opportunity,' Mr Volcker added. 'It's an opportunity to do some things that in ordinary circumstances, in quieter circumstances, would not begin to be possible.'
Mr Volcker was speaking at the Museum of American Finance, where he was receiving an award for distinguished public service and financial leadership. -- REUTERS
By PAUL VOLCKER
Today, the financial crisis has reached a critical point. The sharp decline in the stock market and its volatility dramatically make the point. More important if less visible, the flow of credit through the banking system and the financial markets is seriously impaired -- even in part frozen.
For months, the real economy, apart from housing, had not been much affected by the developing crisis. Now, a full-scale recession appears unavoidable. Important state and local governments face deficits they may be unable to finance. Recessionary forces are apparent in other important countries and exchange rates are unstable.
Those are facts.
They are the culmination of economic imbalances, a succession of financial bubbles and financial crises that have been building for years. It's no wonder that confidence in markets, banks, and financial management has been badly eroded. Without effective action, fear might take hold, threatening orderly recovery.
Fortunately, there is also good reason to believe that the means are now available to turn the tide. Financial authorities, in the United States and elsewhere, are now in a position to take needed and convincing action to stabilize markets and to restore trust.
First of all, there is now clear recognition that the problem is international, and international coordination and cooperation is both necessary and underway. The days of finger pointing and schadenfreude are over. The concerted reduction in central bank interest rates is one concrete manifestation of that fact.
More important in existing circumstances is the clear determination of our Treasury, of European finance ministries, and of central banks to support and defend the stability of major international banks. That approach extends to providing fresh capital to supplement private funds if necessary.Active efforts are underway to develop stronger netting, clearing and settlement arrangements for certain derivatives, in particular the notional trillions of credit default swaps, the absence of which has contributed to uncertainty and large demands for scarce collateral.
None of that is easy. Some of it poses risks for the taxpayer. All of it is decidedly unattractive in the sense of large official intervention in what should be private markets able to stand on their own feet. Unattractive or not in normal circumstances, the point is the needed tools to restore and maintain functioning markets are there. Now is the time to use them. To that end, the immediate and critical need is determined, forceful and persistent leadership -- extending across administrations and Congresses. Both the public and private sectors must be involved.
The inevitable recession can be moderated. The groundwork can be laid for reconstructing the financial system and the regulatory and supervisory arrangements from the bottom up. The extraordinary interventions by the government (and taxpayer) should be ended as soon as reasonably feasible.
That rebuilding will be the job of another day -- of a new administration here in the U.S., of finance ministries and central banks working together. It must draw upon the strength of the now chastened private sector. It will require more understanding of the risks embedded in so-called financial engineering and of the perverse compensation incentives that have exalted risk over prudence.
There is, and must be, recognition of the essential role that free and competitive financial markets play in a vigorous, innovative economic system. There needs to be understanding, in that context, that financial ups and downs -- and financial crises -- will be inevitable, even with responsible economic policies and sensible regulation. But never again should so much economic damage be risked by a financial structure so fragile, so overextended, so opaque as that of recent years.
Mr. Volcker was chairman of the Federal Reserve from 1979-1987.
Good to know how Volcker feels about the crisis. His views will have a big impact on how the Obama team will handle the measures to reignite the economy. Good to know Volcker is around.
Jose Mourinho has insisted Chelsea would have won the Champions League by now if he hadn’t been forced out of the London club by billionaire Russian owner Roman Abramovich. What a load of bs... you had your chance.
The Portuguese, now in charge of Inter Milan, could only sit and watch as the Blues lost out on penalties to English rivals Manchester United in last season’s final of the Champions League, European club football’s leading competition, after leaving Stamford Bridge in September 2007.
During his three years in west London, Chelsea won two English titles, two League Cups and the FA Cup.
“We’d won absolutely everything apart from the Champions League. I would have won it with Chelsea,” he told the News of the World. “My contract was until 2011, so I would have been there for seven years. It’s enough time.”
Talk about BS of the highest order! Let me find some similar comparisons to Mourinho's arrogance. That's like Madoff saying: "They just didn't give me enough time... just another two years I would have been able to turn around Ponzi thing..., trust me"
p/s photos: Tracy Ip Chui Chui