Behind the 20 Cigar

No one has to tell Paul Volcker about the anguish of high interest rates and a moribund economy. Whereas many top Government officials can often find themselves cushioned from the consequences of their actions as public servants, the chairman of the Federal Reserve has been feeling the direct and personal impact of his economic prescriptions virtually every day of his life for the past 2 1/2% years.

In 1979 Volcker stood near the zenith of a brilliant career in international banking and, as president of the Federal Reserve Bank of New York, commanded a salary of $110,000 yearly. Upon accepting Jimmy Carter's appointment in July of 1979 to become chairman of the Fed, Volcker moved to Washington, took a 45% pay cut, to $60,000 yearly, and for the past 31 months has seen his family's finances deteriorate right along with those of much of the rest of the suffering American public.

During the week, the world's most powerful central banker bunks down in a spartan, $394-a-month one-bedroom Washington apartment so cramped that he can receive only one visitor at a time. Then on weekends he commutes to New York, where his wife Barbara keeps house in an unpretentious Manhattan co-op apartment for their son James, 23, also a banker, who suffers from cerebral palsy. Though she is severely afflicted with arthritis, Barbara has gone to work as a bookkeeper for a small architectural firm to help out. Like many another cash-strapped American family, the Volckers are cutting back. They no longer buy theater tickets, and they have taken in a boarder to help boost their weekly income a little more.

To some, such sacrifices may seem to be tantamount to self-imposed asceticism in an individual of Volcker's position and influence. But Volcker is far less concerned about his finances than he is about the perilous straits of the economy as a whole. Says New York Investment Banker Edwin Yeo, a longtime Volcker friend: "In this age of cynicism, it seems inexplicable, but he is really trying to get something done. He sees inflation as the ultimate hardship for this society, and he is willing to put himself on the line. As for himself, he is just not interested in material things."

Volcker, 54, was first exposed to the arcane world of central banking more than 30 years ago, when he spent a summer vacation from Harvard's Graduate School of Public Administration working as a research assistant for the Federal Reserve Bank of New York. After taking his M. A. he returned to the New York Fed as a money market researcher, and soon developed a reputation as a brilliant thinker and long-term planner. In 1957 Volcker came to the attention of Chase Manhattan Bank's chief economist, John Wilson, who hired him away from the Fed, thereby starting the self-assured young banker on a 25-year shuttlecock career back and forth between Government service and the Chase.

Coming to Washington in 1962 as an aide to his old Fed boss, Robert Roosa, who had been made John Kennedy's Under Secretary of the Treasury for Monetary Affairs, Volcker was lured back to the Chase four years later, but returned again to Washington in 1969, this time to join the Nixon Administration in the Treasury post held five years earlier by Roosa. During 1971 and 1973, Volcker was widely praised both in Washington and in Europe for his adroit handling of the monetary squalls that characterized the U.S.'s decision to break free from a quarter-century of fixed global exchange rates and devalue the dollar.

Historically, Fed chairmen have remained relatively unnoticed among Washington's glamour-seeking politicians. But Volcker's position as the nation's chief inflation fighter has made him uncomfortably prominent. His office mail is filled with two-by-four blocks and keys sent by contractors and auto workers protesting houses that cannot be built and autos that cannot be sold. Frequent television appearances and his outsize frame have made it impossible for him to walk on the street without being noticed. Says a friend: "He's too big and too well known now to go anywhere and retain any privacy, so he just avoids it altogether."

Public life has not, however, changed some of Volcker's more distinctive private habits. He keeps up a love affair with cheap cigars, and is seldom seen without an Antonio y Cleopatra Grenadier, which cost $1.20 for a cardboard package of six. "I used to get them for 90-c-," he grouses. "That's a 33% increase." Cigar ash decorates the lapels of his suits, which usually appear rumpled because he neglects to have them regularly cleaned. Some are clearly past their prime. Says Barbara: "He's got one suit that he thinks looks like silk, but it's just shiny."

The family's financial crunch and Barbara's health repeatedly fuel rumors that Volcker may soon give up his burdensome job. But colleagues who know him well say that quitting is just not his style. Says Wilson, his former Chase boss: "Paul has shown that he is willing to stick to a position and he won't give in." Adds his wife: "He is not confident about himself in some ways, but in his field he is more sure of himself than anybody I have ever known. It may sound egotistical, but I believe that he thinks he is the only man in this country who can do the job. It is the culmination of everything that he has done in his professional life." Volcker's term as chairman of the Fed does not expire until August of next year, and with that kind of stubborn, stick-to-it determination to draw upon, he seems set to serve out every day of his appointment.

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