Former Federal Reserve Chairman Paul Volcker delivered a jarring message to high-level bankers and regulators at an exclusive meeting in Sussex, England. "Has there been one financial leader to say [executive pay] is really excessive? Wake up, gentlemen. Your response, I can only say, has been inadequate," he said, according to the Times of London.
Volcker, a veteran of the financial world and currently chairman of President Obama's Economic Recovery Advisory Board, spoke on Tuesday at the Future of Finance Initiative conference, organized by the Wall Street Journal.
Amid throngs of bankers arguing that new regulations should not impede on financial "innovation," Volcker pushed back, blasting Wall Street's increasingly complex financial products as useless to economic growth. In what seems to have been a shot at exotic securities, he named the ATM cash machine as the most successful financial innovation in the past 20 years, the Times reported.
Volcker is one of a number of financial luminaries calling for at least a partial return to Glass-Steagall -- a Depression-era law that separated Wall Street investment banking from Main Street commercial banking. The Wall Street Journal's editorial page also endorsed the concept in a recent editorial as a way to "reduce moral hazard" and "limit certain kinds of risk-taking by institutions that hold taxpayer-insured deposits."
At the UK conference, Volcker criticized complex financial products that helped lead to economic ruin, such as credit default swaps. He challenged the industry to provide "one shred of evidence" that these financial products are socially useful.
As Washington's Blog points out, Volcker backs the views of billionaire George Soros and "Black Swan" author Nassim Nicholas Taleb, who both want banks to be treated as public utilities.
Some recent critics of current Fed Chairman Ben Bernanke and have said the Fed should learn from Volcker's tenure during the 1980s, when he raised interest rates during a time of economic unease. In minutes from a recent closed-door meeting, the Federal Reserve said that its members are concerned that record-low interest rates could fuel another speculative bubble.
Read the entire piece at the Times of London.