He has not stopped trying to get us out of our mess. Unfortunately, he seems to be a voice in the wilderness, particularly when it comes the Obama administration.
Gretchen Morgenson interviewed him recently. He hit the usual topics - bank capital, derivatives, auditors, too big to fail.
He also spoke about money market funds. They do hold lots of money - almost $3 trillion. However, while some think of them as banks, depositors in these funds have little recourse should the fund fail or decline precipitously. Volcker's opinion: “It seems to me if you are a mutual fund, you should act like a mutual fund instead of a pseudobank.”
He devoted a fair amount of the interview to Fannie and Freddie. Volcker's opinion: “We simply should not countenance a residential mortgage market, the largest part of our capital market, dominated by so-called government-sponsored enterprises. The financial breakdown was in fact triggered by extremely lax, government-tolerated underwriting standards, an important ingredient in the housing bubble. it is important that planning proceed now on the assumption that government-sponsored enterprises will no longer be a part of the structure of the market".
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