President-elect Barack Obama will appoint former Federal Reserve Chairman Paul Volcker on Wednesday to be the chairman of a new White House advisory board tasked with helping to lift the nation from recession and stabilize financial markets, Democratic officials say.
University of Chicago economist Austan Goolsbee, one of Mr. Obama’s longest-serving policy advisers, will serve as the board’s staff director, along with his duties as a member of the White House Council of Economic Advisers. Members of the panel will be drawn from a cross-section of citizens outside the government, chosen for their independence and nonpartisanship.
The board’s mission won’t be to supplant the policy-making role of the Treasury Department and other agencies, but to give Mr. Obama an official forum for getting expert advice outside the normal bureaucratic channels. It will give briefings to the president.
The panel, called the President’s Economic Recovery Advisory Board, is modeled on the Foreign Intelligence Advisory Board established by then-President Dwight Eisenhower in 1956, at the height of the Cold War, when officials worried that that the existing bureaucratic structure was inadequate to help the U.S. keep pace with the Soviet threat. The financial crisis has drawn similar worries that the government isn’t properly organized to monitor and respond to modern financial markets.
For the third straight day, Mr. Obama plans to make what he calls a major economic announcement, dominating the policy news during Thanksgiving week and trying to fill a policy vacuum that has left the nation’s financial markets in an uneasy swoon.
The board’s tasks will be broad: to help design and implement short-term programs to jump-start the economy, raise wages and living standards and confront the housing crisis. It will also address the delicate task of bolstering Washington’s oversight of the financial markets in the wake of a Wall Street collapse that has taken down many of its most venerable institutions.
Obama advisers have pledged a streamlined but tougher regulatory regime that would force more transparency onto hedge funds and private-equity firms, while regulating the trading of exotic instruments such as credit default swaps that helped precipitate the current crisis.
After his election, Mr. Obama was reluctant to assert too much authority on the economy before his inauguration, worried that he would be blamed for the crisis before he had the power to resolve it, Obama aides have said. But with markets remaining fragile, the Obama team decided it couldn’t wait until the Jan. 20 swearing in to begin acting to offer some reassuring clarity about who will manage economic policy next year.
On Monday, Mr. Obama introduced the central figures of his economic team, Treasury Secretary-nominee Timothy Geithner, National Economic Council director Lawrence Summers, and Christina Romer, who will be chair of his Council of Economic Advisers. On Tuesday, he pledged long-term fiscal restraint while standing next to his budget director, Peter Orszag.
Wednesday’s event was more of a surprise, but with it, Mr. Obama has found a place for the former Fed chairman who is largely credited with halting inflation in the early 1980s. Since the financial crisis erupted in September, Mr. Obama has leaned heavily on the 81-year-old Mr. Volcker for advice.
Mr. Volcker may serve another purpose, said Martin Baily, a former Council of Economic Advisers chairman under President Clinton. He will be a counterweight to Mr. Summers, who may dominate policy making from his perch inside the White House.
R. Glenn Hubbard, a senior economic official in President George W. Bush’s first term, had publicly promoted Mr. Volcker for Treasury secretary. He said Tuesday that the former Fed chairman has “an unmatched record of success in leading the Federal Reserve during a period of significant regulatory change, financial innovation, and economic stresses.”
Advisers familiar with the team selection said Mr. Volcker’s advanced age always made it unlikely he would get the Treasury job, but Mr. Obama wanted him in the White House with Mr. Summers, who, like Mr. Volcker, moved into the center of the Obama policy orbit in recent months.
The board will also give a prominent post to Mr. Goolsbee, who was expected to be chair of the Council of Economic Advisers, the post that went to Ms. Romer.