Slayer of inflation. Protector of the consumer... Chairman of the Fed. From 1979 to 1987, Paul Volcker ruled America's central bank. When he saw inflation winter was coming (prices across the economy rose 13% in 1979) he fought back by jacking up interest rates (to a whopping 19%). Inflation hasn't been a worry since the '08 financial crisis, but the Jersey native left us another legacy:
Banks shouldn't gamble with your $$$... That cash in your bank account? Your bank makes money with it. Thankfully, account balances in American banks are protected by the Federal Deposit Insurance Corporation (FDIC) — the government agency that insures your money. If your bank goes bankrupt, you get up to $250K of your cash back, thanks to FDIC's taxpayer-funded program. That's where "The Volcker Rule" comes in:
- It prevents banks from aggressively playing with customers' FDIC-insured cash.
- Banks can't invest customer funds in Netflix stock for their own benefit or make risky hedge fund bets with your savings.
- It wouldn't be fair for banks to benefit from the upside of risky investments with your cacsh, but then ask taxpayers to bail them out through FDIC insurance if those bets go wrong.
That Volcker Rule could've helped prevent the last financial crisis... which is why we're happy the then-82-year-old Volcker pushed for it after Lehman Brothers collapsed in 2009. Preventing banks from engaging in "proprietary trading" with customers' cash is Paul's legacy — and it protects all of us daily without our even realizing it.