William McDonough, Who Guided New York Fed Through Crises, Dies at 83


When it became clear in 1998 that Long Term Capital’s trades were failing, investors began to panic and fears grew that a wider market rout would follow. As Wall Street’s top overseer, Mr. McDonough took it as his mission to persuade the industry’s largest and most competitive firms to work together to put up the money to rescue the hedge fund.

It was a tricky task. He had to make it clear that there would be no taxpayer money involved, while also moving to calm anxious investors concerned that Long Term Capital’s failure would lead to a meltdown in global markets. Moreover, the investment banks assembled by Mr. McDonough were not inclined to put up their own money to bail out one of their own.

The banks ultimately agreed to a $3.6 billion rescue. There was criticism at the time that the New York Fed had gotten too involved in the matter. But, in light of the federal government’s bank bailouts in 2008, Mr. McDonough’s handling of the episode is now seen as a model of effective cooperation between government and the private sector in the heat of a crisis.

People who worked with Mr. McDonough said it was his long experience as a banker that gave him knowledge of the complexities involved and a preference for quick decisions over bureaucratic hand-wringing.

“When you make decisions in a bank you don’t sit around,” said Peter R. Fisher, a top official at the New York Fed at the time who worked closely with Mr. McDonough during the Long Term Capital rescue. “He was a man of action.”

At the time of the Sept. 11 attacks, Mr. McDonough was at a meeting for central bankers in Basel, Switzerland. Seeing the disarray around the bank’s headquarters in Lower Manhattan on television, he ordered that the building’s large garage doors be opened and that shelter and medical care be provided to those fleeing the disaster. Within 24 hours, he was behind his desk on the building’s 10th floor.

He also guided the New York Fed through the Asian financial crisis in 1997 and the institution’s preparations for guarding against a so-called Y2K computer-driven market failure at the onset of the year 2000. He spent the last day, and night, of 1999 at Fed headquarters to ensure there were no glitches.

William Joseph McDonough was born on April 21, 1934, on Chicago’s West Side to first-generation immigrants from Ireland. His mother died when he was 10, and his father, who sold insurance, died within a year. He was sent to live with an aunt, but had to fend for himself financially by delivering newspapers.

His three sisters chipped in to pay tuition for his first year at Campion High School in Prairie du Chien, Wis. He finished first in his class four straight years. The distinction earned him admission to the College of the Holy Cross, in Worcester, Mass., where he graduated in 1956. He received a master’s degree in economics from Georgetown University in 1962. Later, he served in the Navy, and then joined the State Department, where he became fluent in Spanish and French.

In 1967, while serving as a diplomat in Uruguay, he met the chairman of the First National Bank of Chicago, who, impressed with Mr. McDonough’s mix of math skills and international polish, offered him a job.

He rose to vice chairman before retiring in 1989 at 55. He arrived at the New York Fed after another serendipitous encounter: sitting next to E. Gerald Corrigan, the institution’s president at the time, on a plane in 1992. Mr. Corrigan soon asked him to join the New York Fed as head of markets. A year later, he was named president.

Mr. McDonough’s skills and temperament made him comfortable in virtually any situation. He sang a fine Irish tenor and was handy at bridge. His command of French was such that he could deliver policy speeches at the French central bank in the country’s native tongue. Yet what might be called his Irish blarney allowed him to communicate easily with bond traders and lower-level Fed workers.

After leaving the New York Fed, Mr. McDonough worked as a vice chairman at Merrill Lynch and was chairman of the Public Company Accounting Oversight Board, which oversaw the auditing of public companies.

In addition to his wife, Mr. McDonough is survived by three sons, John, Paul and William B.; three daughters, Eileen Tavenner, Fiona McDonough and Alana McDonough; two stepdaughters, Melanie Vere Nicoll and Victoria Michaelis; and 16 grandchildren.

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