Yesterday Paul Volcker, chairman of the Presidential Economic Recovery Advisory Board and former chairman of the Fed, delivered a diatribe at the Federal Reserve Bank of Chicago directed at almost everyone. The Wall Street Journal reports that Volcker scrapped the speech he had prepared for the event and instead extemporaneously criticized almost everyone in the financial system, including bankers, regulators, business schools, and others. 

As an adviser to the president, he veered distinctly off-message. He called the council of regulators created in the new financial “reform” bill “potentially cumbersome,” called for “structural changes in markets and market regulation,” and proclaimed that “[t]he financial system is broken. We can use that term in late 2008, and I think it’s fair to still use the term unfortunately. We know that parts of it are absolutely broken, like the mortgage market which only happens to be the most important part of our capital markets [and has] become a subsidiary of the U.S. government.”

Not exactly a ringing endorsement of the reform bill or of the administration’s regulatory supervision in general. 

One of the reasons that Obama appointed Volcker to the Recovery Board in the first place was surely that it would be better to have Volcker on the inside than to deal with his criticisms from the outside. But it’s starting to seem like Obama overestimated how much Volcker cares about what people think about him at this point. 

This outburst follows on a year and a half’s worth of Volcker butting heads with administration advisers over regulatory reform, usually very publicly. Obama has tried to keep him close enough to soften his rhetoric, but not close enough to have actual influence. Take for example, this October 2009 New York Times article, which had Volcker complaining: “So Mr. Volcker scoffs at the reports that he is losing clout. ‘I did not have influence to start with, he said.”

Volcker is now 83, and seems to have a Jim Bunning-style (“tough sh*t!“) lack of concern for pleasantries. The 2010 version of Volcker won’t hesitate to elope with an assistant or tell everyone exactly what he thinks they’re doing wrong.