WASHINGTON (Reuters) - Former Federal Reserve Chairman Paul Volcker plans to leave his role as head of a panel of experts advising President Barack Obama on the economy, sources familiar with the decision said on Wednesday.
The departure of Volcker, 83, from the President’s Economic Recovery Advisory Board is among a series of changes Obama is planning to announce soon.
The decision to leave the board was Volcker’s. A source close to him said he was ready to continue to advise Obama on an informal basis as often as the president would like.
Volcker became a legendary figure on Wall Street when as Fed chief he broke the back of double-digit U.S. inflation in the early 1980s by sharply raising interest rates.
He began advising Obama during his 2008 presidential campaign and has wielded clout on issues ranging from financial regulation to fiscal policy.
Unique among people who offer economic counsel to Obama from the outside, Volcker has a direct line to the president and does not need to go through the White House economic team to schedule a meeting or a phone call.
But there have been moments of awkwardness for him. Volcker frequently delivers speeches to policy and business audiences, and it has been frustrating for him that when he comments publicly on issues like a value-added tax, his presidential advisory board role has sometimes led people to mistakenly assume he is speaking on behalf of the White House.
The White House declined to comment on Volcker’s exit. The formal announcement of Volcker’s departure is likely to come on Friday when Obama will unveil a number of other changes to his economic team.
The former central banker was the driving force behind the “Volcker Rule,” a provision in last year’s financial reform bill that puts limits on proprietary trading by U.S. banks.
Many on Wall Street vigorously fought the Volcker Rule and some sought to portray Volcker as out of touch with the modern financial system. But he has also received credit for reining in financial industry excesses that helped prompt the global economic crisis.
“My feeling is job well done,” said Thomas Russo, a partner in Gardner Russo & Gardner, a Pennsylvania investment manager with assets under management of $2.38 billion.
“He was a voice of reason as he addressed excesses that inevitably develop in Wall Street conduct when the guardrails are taken down from the financial superhighway.”
Obama also plans to make an announcement on a replacement for Larry Summers, who stepped down as director of the National Economic Council to return to his role on the faculty of Harvard University.
Gene Sperling, a senior U.S. Treasury official, is the frontrunner to take the helm at the economic council, which coordinates advice to the president throughout the administration.
Obama created the economic recovery panel as a means of getting outside advice from experts in business, labor and academia when the economy was in a tailspin. Tax reform and economic competitiveness are among the issues it has weighed in on.
Obama, who has been trying to mend frayed ties with the business community, is considering whether to shift the focus of the economic panel to one that has a greater focus on business outreach.
Volcker will leave the panel in early February.
Some people viewed as possible replacements for Volcker include Yale University’s Richard Levin and Jim Owens, who retired in October as chairman of Caterpillar Inc.
Wall Street is closely watching as regulators put more flesh on the bones of the curbs on proprietary trading that threaten billions of dollars in Street profits.
Bank of America (BAC.N), Morgan Stanley (MS.N), and Goldman Sachs (GS.N) have backed out of or scaled back their proprietary trading and private equity businesses in anticipation of the Volcker rule roll-out.
Writing by Caren Bohan; additional reporting by Ben Berkowitz in New York and Karey Wutkowski in Washington; Editing by Philip Barbara