Former Fed Chairman Volcker Favors Increasing Retirement Age

Feb. 19 (Bloomberg) — Former Federal Reserve Chairman Paul Volcker advocated gradually raising the retirement age to reduce the stress on the Social Security system from the retiring Baby Boom demographic bulge.

Volcker, 82, now an economic adviser to President Barack Obama, said the Social Security program should “raise the retirement age by maybe a year or so” in an interview with Bloomberg Television to air on “In Business With Margaret Brennan” at 10 a.m. New York time today.

He said an increase in the retirement age should be “very gradually implemented” with a phase-in period “strung out over 15 or 20 years.” The full retirement age is now 67 for those born in 1960 or later, according to the Social Security Administration.

Volcker also suggested that mortgage rates could rise soon, saying that while rates are now “very low” it is “a question” whether they will remain so.

“The mortgage market in the United States is in trouble. It’s totally dependent, heavily dependent on government participation,” Volcker said. “It shouldn’t be that way. That’s going to have to be re-constructed”

Volcker, chairman of the White House’s Economic Recovery Advisory Board, called Fannie Mae and Freddie Mac troubled.

“It’s evident that Fannie Mae and Freddie Mac were not a good idea in the first place,” Volcker said. “This hybrid public-private thing sooner or later was going to get us in trouble, and it sure got us in trouble.”

Volcker Rule

Volcker has been the primary promoter of an Obama initiative, which the president has dubbed the “Volcker Rule,” to bar commercial banks from owning hedge funds or engaging in proprietary trading. Volcker called criticism by opponents who claim that the activities are difficult to define “just off- putting.”

“They claim they don’t have sufficient detail because they don’t want to do it,” Volcker said.

“Are you trading de novo in your own interest or are you responding to the customer’s desire to sell or buy? Now that distinction I think is reasonably clear,” he added.

To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net.

Last Updated: February 19, 2010 00:00 EST

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