In addition to Volcker, Obama revealed that Austen Goolsbee, an economist from the University of Chicago, will serve as staff director and chief economist of the board and head liaison between the board and the White House.
He will also serve as one of three members of the council of economic advisers.
Wednesday's announcements are the latest in a series of attempts by Obama's transition team to address concerns over the ailing US economy.
Al Jazeera's Cath Turner in Washington said Obama was ensuring he is being seen as filling a vacuum left by George Bush, the US president, to give both investors and stock markets reassurance that he is on the "front foot" and will tackle the financial crisis "head on".
US stocks markets had mixed results in early trading on Wednesday, with the Dow Jones Industrial Index down 89 points, or 1.05 per cent in midmorning trading to 8,390.18 points.
|Sales of new homes have dropped
sharply across the US [EPA]
The news came amid signs of more US economic misery after as a new government report on Wednesday showed US consumer spending had dropped one per cent in October, the steepest fall since September 2001.
Statistics from the US Commerce ?Department report showed the sharp drop in spending came despite incomes rising by 0.3 per cent in the same month.
In addition, sales of new US homes fell 5.3 per cent in October to the lowest
point in nearly 18 years, while the average price of a new home dropped to $218,000, the lowest level since 2004, a separate Commerce Department report showed on Wednesday.
A third report the US government said unemployment claims fell by more than expected following a 16-year high last week.
The Labour Department said initial requests for unemployment benefits fell to a seasonally adjusted 529,000 from the previous week's upwardly revised figure of 543,000, lower than analysts expected but still at recession levels.
In the past three days Obama has unveiled a slew of new appointments, including Peter Orszag as head of the Office of Management and Budget and Rob Nabors being named deputy budget director.
The office is responsible for developing and submitting the president's annual budget proposals to the US Congress.
Nabors has been the top staff aide on the House Appropriations Committee, which prepares spending legislation, while Orszag, an economist, was director of the US Congressional Budget Office.
As the top two officials at the office, Orszag and Nabors will closely examine federal
spending to cut out wasteful programmes.
And on Monday, Obama chose Timothy Geithner, the head of the New York Federal Reserve, as his treasury secretary subject to confirmation by US Congress and named several other top economic advisers.