VOLCKER LEAVING DESPITE REAGAN REQUESTS TO STAY
Paul Volcker's departure as Federal
Reserve Board chairman came despite pleas from the Reagan
administration that he stay at the helm of the U.S. central
bank, U.S. officials said.
    "The President made it very clear that he would be very,
very pleased had the chairman's decision been otherwise,"
Treasury Secretary James Baker said.
    A Reagan administration official, who asked not to be
identified, said Baker too had urged Volcker repeatedly in the
past several months to consider staying on as chairman.
    But there were no indications the administration had told
Volcker that it was in the national interest for him to stay
and that current global economic uncertainties required it.
    Associates of Volcker have assumed Volcker would only have
stayed on in such circumstances. "He doesn't care a lot,
emotionally, about a third term," Nikko Securities vice-chairman
Stephen Alixrod, until last year a top Fed staffer, told
Reuters recently.
    Officials are confident that newly-nominated chairman Alan
Greenspan will re-establish close working relations with Baker
and his credentials eventually will calm markets.
    One Reagan administration economic policymaker, who asked
not to be named, pointed out that Baker and Greenspan worked
together closely in the Ford administration.
    At the time, Baker was acting Secretary of Commerce and
Greenspan headed the President's Council of Economic Advisers.
    Reagan administration officials made clear, meanwhile, that
the announcement, precipitated by Volcker's unshakeable
decision to quit, came in order to clear up uncertainty ahead
of the Summit of leading industrial democracies in Venice.
    President Reagan might have been in an embarrassing
position if no decision had been made by then.
    Volcker enjoys the respect of most top economic officials
abroad, and is admired at the West German Bundesbank, and in
Tokyo, despite his criticism  of Japanese policies.
    Financial markets, possibly reflecting some of the
disappointment in foreign capitals, drove the dollar sharply
lower on news of his departure, prompting central bank
intervention to stem the fall, dealers said.
    Finance Ministries and central banks of the other summit
nations -- Japan, West Germany, Britain, France, Italy and
Canada -- were informed shortly before the news was announced,
Baker told reporters today.
    Monetary sources also said one reason Volcker decided to
resign was his personal financial situation and his marriage 
-- his wife lives in New York and did not want him to take up a
second term in mid-1983.
    Volcker has foregone potentially million-dollar salaries to
a life almost overwhelmingly devoted to public service at pay
rates low relative to his financial commitments.
    Both these reasons at one time prompted him to consider
stepping down before his second term was completed.
    But Volcker also hinted there might be more than personal
reasons for his decision. "It was a personal decision, taking
account of a lot of things, including purely personal
considerations and others," he told reporters.
    Fed sources note Volcker's considerable unease at the lack
of progress by the administration in reaching a budget deficit
reduction agreement.
    In addition, Volcker would have faced four more years with
a Board that he was less than comfortable with, monetary
sources say. The other five members are Reagan appointees.
    What may unsettle markets, however, is the fact that the
Fed governors now have only six to seven years' collective
experience between them, at a time of great financial
uncertainty.
    Analysts said that while Greenspan might well be considered
as tough an inflation-fighter as Volcker, his Republican
credentials could make him more of a political Fed chairman
than Volcker.
    An administration official said Volcker was consulted on
Greenspan "and very much approved of his replacement."
    But one analyst compared Greenspan's relationship to the
administration, to whom he has been an unofficial economic
adviser, with the relationship former chairman Arthur Burns had
with the Nixon administration.
    Burns was somewhat more sympathetic to the administration
viewpoint than Volcker has been, and Burns was less willing to
make radical policy changes.
    Making clear his decision was a strong one, Volcker told
reporters, "I told (Reagan) with considerable definitiveness
yesterday." Administration officials said Volcker arrived at the
White House yesterday afternoon with his resignation.
    When renominated in mid-1983, Volcker said he would
probably step down within two years. Monetary sources said the
departure of Donald Regan as Treasury Secretary was one factor
that convinced him to stay on. Regan and Volcker clashed almost
from the start of the administration.
    Another, these sources said, was the prospect of being able
to work with Baker as Treasury Secretary to tackle the
international debt crisis and deal with the then high-flying
dollar.
 Reuter
