The Wall Street Journal article on Paul Volcker becoming a key economic adviser to Obama says:
Like other prominent economists, Mr. Volcker also advocated early on for the recapitalization of banks. On this advice, Sen. Obama proposed direct-equity infusions in banks in his frequent conference calls with Treasury Secretary Henry Paulson.Say what? Volcker was a prominent supporter of the plan to purchase illiquid assets from banks—that is, the original Paulson Plan. On September 17, Volcker, along with Nicholas Brady and Eugene Ludwig, wrote an influential op-ed in the WSJ that said:
There is something we can do to resolve the problem. We should move decisively to create a new, temporary resolution mechanism. ... This new governmental body would be able to buy up the troubled paper at fair market values, where possible keeping people in their homes and businesses operating. Like the RTC, this mechanism should have a limited life and be run by nonpartisan professional management.This op-ed was published on Wednesday of the Week From Hell—that night, Paulson and Bernanke had their famous come-to-Jesus meeting with the Congressional leadership, convincing them of the need for a bailout. By Sunday night the Treasury had unveiled Paulson Plan 1.0, which was—you guessed it—to create a mechanism to purchase illiquid assets from banks! Maybe Volcker did an interview, or wrote another op-ed that I'm not aware of, in which he advocated for recapitalization of the banks, but I find that highly unlikely. If anything, Volcker threw his weight behind the Paulson Plan—a plan that Obama supported, but considered second-best to directly recapitalizing the banks.