Volcker named to lead panel analyzing economic recovery

Former Federal Reserve chairman Paul Volcker (center) and chief economist-designate Austan Goolsbee were with Barack Obama as he addressed reporters in Chicago yesterday. (Pablo Martinez Monsivais/ Associated Press)

Beefing up his economic team, President-elect Barack Obama yesterday named former Federal Reserve chairman Paul Volcker to lead an advisory panel on dealing with the financial crisis.

The Economic Recovery Advisory Board, modeled on a panel created by President Dwight Eisenhower to give unvarnished counsel on intelligence issues, is to give Obama independent, nonpartisan information, analysis, and advice.

"The reality is that sometimes policy-making in Washington can become a little bit too ingrown, a little bit too insular," Obama said. "The walls of the echo chamber can sometimes keep out fresh voices and new ways of thinking. You start engaging in group-think."

Volcker, 81, is a legendary central banker who raised interest rates and restricted the money supply to tame raging inflation in the 1980s.

"He pulls no punches," Obama said of Volcker. "He seems to be fairly opinionated."

Austan Goolsbee, 39, a University of Chicago economist and key Obama policy adviser, will be the panel's staff director. Obama said other members of the panel will come from outside Washington and government, and from diverse backgrounds in business, labor, and academia.

"At this defining moment for our nation, the old ways of thinking and acting just won't do. They call for us to seek fresh thinking and bold new ideas from the leading minds across America," Obama said at a news conference in Chicago, his third in three days on the economy.

Asked whether his series of conferences reflected frustration with the Bush administration's response to the economic crisis, Obama sidestepped direct criticism of the president or Treasury Secretary Henry Paulson, saying he was frustrated by eight years of declining middle-class wages, families losing health insurance and pensions, students being unable to afford college, and Washington's inability to tackle crucial problems.

"I was elected with the charge of getting this economy back in shape," he said.

As he spoke, there was more bad news: The government reported yesterday that jobless claims remained at recessionary levels, consumers had cut back on their spending by the largest amount since the 2001 terrorist attacks, orders to US factories had plunged anew, and home sales had fallen to the lowest level in nearly 18 years.

Asked for holiday shopping advice, Obama said families are justifiably nervous about their financial situation, but they need to be confident that the country will recover from recession, as it has before. He said the country cannot afford to get caught up in a downward spiral of consumers pulling back on spending, then businesses pulling back on hiring and purchasing, and so on.

"Our future is bright if we make good decisions," he said. "People should understand that help is on the way."

Obama, however, declined again to detail his economic stimulus plan that he wants in place soon after he takes office on Jan. 20, saying his team is working on it and repeating his vow that it would create or save 2.5 million jobs in his first two years as president.

In an interview that aired last night on ABC News, Obama said he worries that the economic crisis could worsen by the time he becomes president. "One of the concerns I have is that the economy is so weakened that the next 60 days are going to be difficult because we've got a president who, even though he may mean well, is now sort of in lame-duck status" and Congress isn't in session.

"And I don't have the reins of power," he added.

In the same interview, Obama also slapped the Big Three auto executives for taking luxury private jets to Washington last week to plead for $25 billion in federal loans.

"Well, I thought maybe they're a little tone-deaf to what's happening in America right now," he said. "And this has been a chronic problem, not just for the auto industry - I mean, when people are pulling down $100 million bonuses on Wall Street and taking enormous risks with other people's money, that indicates a sense that you don't have any perspective on what's happening to ordinary Americans."

Asked whether bank executives should give up year-end bonuses, Obama said they should. "That's an example of taking responsibility," he said. "I think that if you are already worth tens of millions of dollars and you are having to lay off workers, the least you can do is say, 'I'm willing to make some sacrifice as well, because I recognize that there are people who are less well-off who are going through some pretty tough times.' "