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The economic sheriff who stood up to inflation

Paul Volcker was a public figure in the 1970s and '80s, but he always seemed like a character from an earlier era. Think of a sheriff in the Old West circa 1880. Volcker was tall, 6 feet, 7 inches; gruff; and a bit aloof. He was also incorruptible. He did the right thing -- in his case, stand up to the menace of inflation -- because it was the right thing to do, not because it was popular or lucrative. When the job was done, he rode off into the sunset, rarely to be heard from again.

In ''Paul Volcker: The Making of a Financial Legend," veteran New York Times reporter Joseph Treaster does a nice job capturing the man who ran the Federal Reserve from 1978 to 1987. He is far less successful in telling the story of Volcker's tenure as Fed chairman during a tumultuous period of economic history. The book is short on details and skimpy on analysis. It reads more like a term paper than a full-blown biography or history. William Greider's 1987 book ''Secrets of the Temple" offers a far richer, more definitive account of what went on inside the Fed while the battle against inflation was raging.

Paul Volcker was a second-generation public servant. His father was the town manager in Teaneck, N.J. Like his son, the elder Volcker was stern and a straight arrow. When the public works department sent out a snowplow to clean his driveway after a storm, Paul Sr. gave them a tongue-lashing. He didn't want to create the appearance he was entitled to special treatment.

The younger Volcker spent most of his career in government, at the Treasury and the Fed. While his peers earned big salaries on Wall Street, Volcker lived in a one-bedroom apartment in a student neighborhood in Washington. His rent was $394 a month. He watched the news on a 10-inch black-and-white television set. With his family in New York, largely because of his wife's poor health, Volcker maintained a Spartan existence more appropriate for a monk than a captain of finance.

Volcker's detachment came in handy at the Fed. He became chairman at a time when inflation was approaching double-digit levels. The only solution was shock therapy. He had to jack interest rates up to stratospheric heights and keep them there until inflation was defeated. It was not a popular job. Congressmen denounced Volcker. Car dealers mailed him keys from the cars they couldn't sell because rates were so high. Home builders blamed him for mortgage rates that reached 18 percent.

The Volcker Fed put America through a brutal recession in the early 1980s. But when Volcker eased up in 1982, inflation was on the wane. Ronald Reagan's tax cuts get a lot of credit for the boom of the 1980s, but in truth, Volcker's defeat of inflation was a much bigger deal. The low interest rates that came with lower inflation provided the fuel for both a better economy and a better stock market. As the economist Allen Sinai told Treaster, Volcker's accomplishments ''were essential to laying the groundwork for the performance of the United States in the 1990s."

Unlike his successor, Alan Greenspan, Volcker wasn't very good at getting along with politicians. His independence and his willingness to raise rates, even during an election year, didn't sit well with either Jimmy Carter or Reagan. Treaster quotes a top Carter aide, who while admitting Volcker broke the back of inflation, said, ''He also broke the back of the Carter administration." Pressure from Reagan deputies eventually drove Volcker out of government in 1987.

But Volcker didn't retire. Instead he has taken on one difficult assignment after another. He mediated a dispute between Swiss banks and Jewish Holocaust survivors and then tried, unsuccessfully, to rescue Arthur Andersen, the troubled accounting firm. Recently, he agreed to head an investigation looking into allegations of corruption in the United Nations' Oil-for-Food program in Iraq. He isn't taking any money for the job, which is likely to last for months. They don't make them like Paul Volcker anymore.

Charles Stein is a Globe columnist. He can be reached at stein@globe.com.

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