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Volcker’s Aim: Responsive Government

Paul A. Volcker served as chairman of the Federal Reserve in both the Carter and Reagan administrations.Credit...Robert Caplin for The New York Times

As chairman of the Federal Reserve, Paul A. Volcker tamed inflation. More recently, he took on the country’s biggest banks in an effort to force them to give up lucrative but risky Wall Street-style trading.

Mr. Volcker will declare another war on Wednesday, this time on the public’s eroding faith in government. He plans to begin a foundation called the Volcker Alliance, aimed at improving how government works at the local, state and federal levels.

As he did in those other battles, Mr. Volcker faces a struggle. Wall Street has been pushing hard lately for a looser interpretation of what is widely known as the Volcker Rule, giving banks more flexibility when it comes to trading.

Mr. Volcker plans to deliver an address on Wednesday at the Economic Club of New York in which he will spotlight the challenges facing financial regulatory reform, including how slowly Washington has put the Dodd-Frank legislation, which was signed into law nearly three years ago, into effect.

“I’ve gotten concerned by the seeming impotence of federal regulatory agencies,” Mr. Volcker said. “Too many agencies overlapping, too many opportunities for delay.”

Mr. Volcker, whose goal is to start with a budget of about $5 million a year, plans to finance a substantial part of that personally, and will raise money from outside donors.

The group will work with universities as well as private entities like the RAND Corporation and the Partnership for Public Service, supporting research projects, awarding fellowships and holding conferences on how to make government work better.

Despite well-financed programs at Ivy League universities like Harvard and Princeton and elsewhere, in some academic quarters, “public administration is almost a bad word,” Mr. Volcker said in an interview on Tuesday at his office in Rockefeller Center. Too often, he said, the focus is on theory rather than the nuts and bolts of governance.

“We’re not going to be a think tank,” he said. Initially, “We’re going to be a catalyst, a coordinator, with a couple of senior people, a few junior people and some nonresident fellows.”

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Mr. Volcker said, “I’ve gotten concerned by the seeming impotence of federal regulatory agencies.”Credit...Robert Caplin for The New York Times

“I want it to be free-standing,” said Mr. Volcker, who said he worried his project would not have the same impact if it were begun under the auspices of an academic institution.

The Volcker Alliance will operate out of Mr. Volcker’s offices in New York.

One focus will be putting into effect the Dodd-Frank legislation, which was passed in 2010 and was aimed at strengthening financial market regulation. The instituting of specific regulations, however, has been mired in federal bureaucracy. Agencies have been slow to write the regulations, including the provision known as the Volcker Rule, which seeks to prevent financial institutions with government backing from placing bets with their own capital.

The final language for the execution of the Volcker Rule may be completed this year, but some experts fear the rule-writing process could easily slip into 2014. The banking industry, which has deep pockets and possesses great influence in Washington, has been mounting a huge lobbying effort to dilute the Volcker Rule’s effects.

Among other things, the Volcker Alliance will also explore ways to promote the training of bank supervisors who might one day be charged with enforcing the Volcker Rule. In addition, it is looking at a partnership with a university that would focus on putting financial change into effect.

Mr. Volcker acknowledged that it would not be easy to alter public perceptions of government, noting how sharply attitudes had changed since he entered public service during the Kennedy administration at the Treasury Department. As Washington has become more polarized, fewer and fewer public officials have careers resembling that of the 85-year-old Mr. Volcker, who served in a variety of administrations, Republican and Democratic.

After a stint at what was then Chase Manhattan Bank, he returned to the Treasury Department, this time in the Nixon administration. He was president of the Federal Reserve Bank of New York from 1975 to 1979, and then was Fed chairman in the Carter and Reagan administrations.

In the early years of Mr. Volcker’s two terms, the Fed raised interest rates sharply, which helped set off a recession but also ended the high inflation rates that plagued the United States in the 1970s and early 1980s.

A well-connected veteran of Washington and academia, Shelley H. Metzenbaum, will serve as the group’s president, and Mr. Volcker has recruited other public figures for its board, like former Senator Bill Bradley and Alice Rivlin, a former Fed vice chairwoman who was director of the Office of Management and Budget in the Clinton administration.

Other board members will include Sheila Bair, the former chairwoman of the Federal Deposit Insurance Corporation, as well as William H. Donaldson, who co-founded the Wall Street firm of Donaldson, Lufkin & Jenrette and went on to lead the Securities and Exchange Commission during the George W. Bush administration.

“So much energy goes into getting a law passed,” Ms. Metzenbaum said. “There isn’t the same impetus in terms of implementation.”

“It’s about accountability,” she added. “How do we get government agencies to keep moving forward?”

A version of this article appears in print on  , Section B, Page 1 of the New York edition with the headline: Volcker’s Aim: Responsive Government. Order Reprints | Today’s Paper | Subscribe

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