WASHINGTON, Oct. 21 (UPI) -- Former Federal Reserve Chairman Paul Volcker said he espouses a banking system that separates commercial and investment banking.
"The guy's a giant; he's a genius; he is a great human being," Austan Goolsbee, an adviser to President Obama said. "Whenever he has advice, the administration is very interested."
But the administration is not taking Volcker's advice to separate banks into those that handle federally insured deposits and those that make risky bets on securities that threatened the financial system last fall, The New York Times reported Wednesday.
"The banks are there to serve the public and that is what they should concentrate on. These other activities create conflicts of interest. They create risks, and if you try to control the risks with supervision, that just creates friction and difficulties," Volcker said.
Volcker, 82, serves as the head of the Economic Recovery Advisory Board, but works in New York and has a presidential audience infrequently, The Times said.
He has one fan with sizable credentials. Joseph Stiglitz, a Nobel laureate in economics said returning to a system of separate banks would create "a cleaner, safer banking system."