Former New York Fed president Bill McDonough, in memoriam

Former New York Fed president William McDonough passed away last week.

William “Bill” McDonough was my friend. We met in January 1993 when I took up my new position leading international affairs at the Treasury Department, and Bill was preparing to become president of the New York Federal Reserve Bank. For the next eight years we probably spoke twice a week and much more frequently in times of crisis. I learned more from Bill than I was ever able to express to him.

In some ways, Bill was from central casting’s traditional idea of a central banker, and he acted the part. I never saw him in public and in doubt. In other ways, he was a very different from the typical central banker.

• Most prefer to read a data table than a face. Not Bill. He knew how important relationships were when the chips were down and invested in them every day.

• Most see the world in terms of global generalities. Bill cared about national particularities from native languages, to local rules, to culture. It made him a uniquely trusted figure, especially in Latin America but also around the world.

• Most are stern and serious. I always picture Bill with a smile on his face as he explained to me what you had to grab to get hearts and minds to follow. He took what he did plenty seriously but he never took himself too seriously.

• Most are pragmatists. Bill was too, but he was also a moralist. He knew that he lived a lucky life and he never forgot his good fortune. And he never let his friends forget that they too were, for the most part, highly fortunate and had obligations to those whose luck had been less good.

History alters perspectives. Some of Bill’s most important policy thrusts look more clearly right today than they did at the time. Bill was on to what we delicately call agency issues in finance before it was fashionable, as he warned about compensation practices. He was prescient on issues of systemic risk and capital adequacy. And his handling of Long-Term Capital Management, a hedge fund, presaged contemporary discussions of orderly workouts in important respects.

Gerry Corrigan had a worthy successor and Tim Geithner had a worthy predecessor in William McDonough.

I treasured Bill’s humor, wisdom and loyalty in equal measure. In those years of the Mexican financial crisis, the Asian financial crisis, a struggling Japan, and an ultimately defaulting Russia, Bill’s earthy, forceful warmth was a wonderful counterpart to the more abstract and analytical Greenspan in the conduct of financial diplomacy. Millions who never knew his name lived better more secure lives because of what he did.

May he rest in peace.

Lawrence Summers is a professor at and past president of Harvard University. He was treasury secretary from 1999 to 2001 and an economic adviser to President Barack Obama from 2009 through 2010.

from Wonkblog http://ift.tt/2nqe5ID