Volcker Leaving Fed Helm; Greenspan to Replace Him : Reserve Chief Going Voluntarily

Paul A. Volcker, chairman of the Federal Reserve Board and one of the most powerful men in the country, will step down in August, President Reagan announced today, and economist Alan Greenspan will be nominated to fill the post.

The announcement momentarily stunned Wall Street. But the stock market quickly recovered, although it slipped at the close.

Volcker, appearing with Reagan and Greenspan at a White House briefing, said he is relinquishing the post voluntarily after eight years. “I had no feeling I was being pushed,” he said.

Accepting the resignation, Reagan said, “I accept Mr. Volcker’s decision with great reluctance and regret.”

The nomination of Greenspan, chairman of the Council of Economic Advisers from 1974-77 under President Gerald R. Ford and now a New York economic consultant, came on the eve of Reagan’s departure for next week’s seven-nation economic summit in Venice.

Analysts had suggested that Reagan wanted to make the announcement in advance of the summit, so that the post would not become a summit issue.

“Filling Paul Volcker’s shoes will be a major challenge,” said Greenspan, 61.

‘The Time Has Come’

Volcker, 59, the cigar-smoking, 6-foot-7 Fed chairman who had won wide respect from leaders around the world, told reporters, “I think the time has now come to return to private life.”

He said the decision to step down had been taking shape in his mind for some time.

Volcker, who is credited by many economists with playing a key role in formulating policies that helped bring inflation down from its double-digit levels of the early 1980s to its current level of less than 3%, voiced “happiness and delight” with the selection of Greenspan as his successor.

U.S. financial markets were initially jolted by the bombshell announcement because of the widely held belief that the Administration would ask Volcker to serve a third, four-year term, and that he would accept.

The Dow Jones industrial average dropped 24 points in the minutes after the announcement but it quickly turned around to narrow the loss.

Greenspan, asked repeatedly about his stance on inflation and the dollar and the effect of his appointment on the value of the dollar, told reporters:

“I have to go for Senate confirmation and I intend to withhold substantive comment until that time.”

First Named by Carter

Greenspan was asked how long it took him to accept the position, offered only Monday. “Milliseconds,” he said.

Volcker, a Democrat who was first appointed by President Jimmy Carter in 1979 and reappointed by President Reagan in 1983, said he does not know what he will do next. “I have not the vaguest idea this morning.”

“There’s a time to come and a time to leave,” Volcker said.

The Fed chief said he told Reagan on Monday that he did not want to serve another term and the President immediately mentioned Greenspan.

Treasury Secretary James A. Baker indicated, however, that Reagan had wanted Volcker to stay. “The President would have been very, very pleased had the chairman’s decision been otherwise,” Baker said.

Many observers earlier this year had thought that Volcker’s chances of holding on to the Fed job were dubious. But his standing received a huge boost with the departure of his longtime foe, White House Chief of Staff Donald T. Regan.

Regan had contended that the Fed chief’s tight-money policies had made the 1981-82 recession worse than it should have been.