Obama picks Volcker as economy adviser

By Jeff Mason and Ross Colvin

CHICAGO (Reuters) - U.S. President-elect Barack Obama on Wednesday named former Federal Reserve Chairman Paul Volcker to chair a new panel to advise him how to stabilize financial markets and navigate a potentially painful recession.

It was the latest step toward tackling problems undermining the U.S. economy and was part of an aggressive effort by Obama to demonstrate that his administration will face the global financial crisis head-on when he takes over on January 20.

The new panel was modeled on an advisory panel that gives the president nonpartisan advice on national security matters, Obama said.

"Sometimes policymaking in Washington can become a little bit too ingrown, a little bit too insular," Obama said at his third news conference in as many days. "This board will provide that fresh perspective to me and my administration."

Financial markets were not impacted by the news of the appointment, which had leaked overnight.

Volcker, 81, has been an important adviser to Obama on economic issues. As Federal Reserve chairman in the early 1980s, he was credited with taming inflation through policies that also contributed to a recession at the time.

Obama named campaign adviser Austan Goolsbee as the panel's staff director. Obama said the University of Chicago professor had "shaped his thinking" on economic matters.

Asked about criticism that he was taking too many officials from the administration of former President Bill Clinton into his fold, Obama responded forcefully.

"What we are going to do is combine experience with fresh thinking," he said. If his top economic officials, such as his pick for treasury secretary, Timothy Geithner, had not had ties to the Clinton government, whose term ended in 2002, they would have no Washington experience at all, he said.

"Understand where the vision for change comes from, first and foremost. It comes from me," he said. "That's my job."

Other members of the new board, who will be named later, will be drawn from business, labor and academia, Obama said.

MORE BAD ECONOMIC NEWS

The drumbeat of bad news continued on Wednesday, as the Commerce Department reported consumers cut spending during October at the steepest rate in more than seven years and orders for costly manufactured goods plummeted.

Later on Wednesday Obama and his family handed out food to poor people in Chicago's South Side neighborhood ahead of the November 27 Thanksgiving holiday.

In addition to naming his top economic advisers, Obama has come closer to forming his national security team, with reports saying that current Defense Secretary Robert Gates will remain in his post and retired Marine Gen. James Jones will take over as national security adviser.