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Volcker's term in office was scheduled to end in August, and the question of whether Reagan would reappoint the chairman generated more excitement and suspense than Billy Martin's fate as manager of the New York Yankees. For a while, Presidential Counsellor Edwin Meese and Treasury Secretary Donald Regan urged Reagan to choose his own man to replace Volcker, a Carter appointee. The anti-Volcker group, though, never came up with a serious candidate, and the business community rallied around the chairman because of his record as an inflation fighter. Finally on June 18 the President interrupted a radio address with what he called a news flash: "Give me the city desk. I've got a story that'll crack this town wide open! . . . I have asked Chairman Paul Volcker to accept reappointment."
The hoopla surrounding Volcker's nomination heightened his status as the staid financial community's first superstar. At his congressional confirmation hearing, so many lawmakers, reporters and visitors were eager to hear the chairman that the session had to be moved from the Senate Banking Committee hearing room to the huge Caucus Room, where Senators had once interrogated the Watergate conspirators. Yet despite his power and prestige, Volcker retains his austere personal style. He still lives in a cubbyhole apartment near his office, bums cheap cigars from colleagues and brags about his watch, which looks exactly like a $1,500 Rolex but cost him only $60.
In their battle against inflation, Reagan and Volcker had good fortune on their side. With the world awash in an oversupply of oil, the once mighty Organization of Petroleum Exporting Countries could no longer dictate the cost of crude. The group's new powerlessness moved Mani Said al-Oteiba, Oil Minister of the United Arab Emirates, to compose a doleful poem that began:
l am truly troubled and with OPEC distressed,
OPEC's major crisis is no longer suppressed,
The market is stagnant, the price of crude oil depressed.
In January a rancorous OPEC session in Geneva broke up before agreement could be reached on a pricing strategy, and the group seemed on the verge of disintegration. Within three weeks, a price war erupted, led by Britain and Norway, two non-OPEC producers, and Nigeria, an OPEC member. Finally in March, after a twelve-day session in London, the bickering band of OPEC ministers agreed to slash their bench-mark oil price from $34 per bbl. to $29, the first cut in the group's 23-year history.
The dip in petroleum prices and the sharp drop in U.S. interest rates helped ease pressure on many developing nations that are struggling under enormous and dangerous debt loads, but their finances remain shaky. Two weeks ago, the new government of Argentina requested a six-month grace period for interest payments on its $40 billion debt. A team of bankers and troubleshooters from the International Monetary Fund approved a $10 billion emergency loan package in November that once again saved Brazil from defaulting on its $91 billion debt, but the country's economy is deeply depressed and has been plagued all year by strikes, demonstrations, riots and looting. As a major petroleum exporter, Mexico was hurt by the oil price decline. Nonetheless, it is managing to keep up with interest payments on its $88 billion in foreign loans.