Volcker Sees Prolonged Recession

The country is in for a prolonged recession that will end only when a sense of confidence and trust returns to the U.S. financial markets, former Federal Reserve Board Chairman Paul Volcker told a group of real estate developers in Miami Beach. "It's going to be a tough period," Mr. Volcker said at the Urban Land Institute's Fall Meeting. "We learn the hard way, but we do learn." Appointed by President Carter to rule over the country's banking system in 1979, and reappointed by President Reagan, Mr. Volcker was chairman of the Fed's board of governors for eight years. He is largely credited with taming rampant inflation, bringing to an end a severe recession in the 1980s, and laying the groundwork for the following two decades of economic stability. He was succeeded by Alan Greenspan in 1987. He told ULI that while the economy was in a "serious recession," he was "not suggesting at all" that the downturn is comparable to the Great Depression. Noting that the economy continued to expand right up to the point where the financial markets hit the rocks, the former Fed chairman said confidence will eventually return, "it's just a question of how long it takes. Unfortunately, it takes a crisis to wake us up, and this is a big one." Mr. Volcker said he was "amazed" when he learned how large the subprime mortgage sector had become.