Correction to Former New York Fed Chief Dies Article on Thursday

By Michael S. Derby Features Dow Jones Newswires

William McDonough, who led the Federal Reserve Bank of New York through the Sept. 11, 2001, terrorist attacks and their aftermath, died Monday.

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Mr. McDonough, 83 years old, died at his home in Waccabuc, N.Y., the New York Fed said Thursday. The bank didn't give a cause of death.

Mr. McDonough led the bank, which serves as the U.S. central bank's main point of contact with Wall Street, from 1993 to 2003. His tenure was in some ways a test run for broader challenges his central-bank successors have dealt with over the last decade.

He confronted financial-sector troubles with public interventions, while overseeing the start of a greater level of transparency and showing a willingness to tackle economic issues that were outside of the Fed's core mission of keeping prices stable and job growth strong.

Outside of his steady leadership during and after the 9/11 attacks, Mr. McDonough's best-known and most controversial role was in helping broker a private-sector bailout of the imploding hedge fund Long-Term Capital Management in 1998.

The giant, secretive investment fund, founded by star traders and Nobel laureates heavily connected to key banks, threatened the stability of the world financial system after a series of trades went south. The Fed's intervention, which didn't involve public money, helped mitigate the crisis. But it also brought criticism from those who felt it was wrong for the central bank to help save wealthy investors from bad decisions.

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Mr. McDonough started at the New York Fed in 1992 as head of its markets group, which deals directly with Wall Street and implements the monetary policy objectives of the U.S. central bank's interest-rate-setting Federal Open Market Committee.

Before joining the central bank, Mr. McDonough had a long career in banking. He retired from First Chicago Corp. and its bank First National Bank of Chicago in 1989 after two decades of work there. Before that, he worked at the U.S. State Department and served as a Navy officer.

After the New York Fed, he went on to lead the Public Company Accounting Oversight Board from 2003 to 2005. He was at one time among the names seen as a possible successor to Fed Chairman Alan Greenspan, who left the central bank in 2006.

He was succeeded as New York Fed president by Timothy Geithner, who later became President Barack Obama's first Treasury secretary.

Mr. McDonough drew praise for his 9/11 response. The World Trade Center attacks occurred less than half a mile from the New York Fed's fortresslike main office in lower Manhattan, and much of the bank's operations had to be moved to satellite offices.

Mr. McDonough also oversaw the bank as it confronted the Y2K computer bug problem. While the actual date change into the year 2000 proved to be a nonevent, the preparation in 1999 was anything but. Under his leadership, the New York Fed pumped liquidity into the banking system to ensure financial firms had enough cash to deal with potential problems related to computer glitches tied to the date.

The central banker served at the dawn of a long process that has seen the Fed move from being an institution shrouded in secrecy to one that is more open. For example, the Fed only began formally announcing changes in its interest-rate target in 1994. But progress toward transparency was slow under his leadership, before accelerating under Mr. Geithner.

Mr. McDonough, who largely mirrored the views of Mr. Greenspan on monetary policy issues, built a reputation as an early voice at the central bank warning about income inequality and other social issues he saw as complicating the economic landscape. He also raised concerns about Wall Street ethics, a topic that has been revisited by current New York Fed leader William Dudley.

Write to Michael S. Derby at michael.derby@wsj.com

William McDonough, who led the Federal Reserve Bank of New York through the Sept. 11, 2001, terrorist attacks and their aftermath, died Tuesday.

Mr. McDonough, 83 years old, died at his home in Waccabuc, N.Y., the New York Fed said Thursday. The bank didn't give a cause of death.

Mr. McDonough led the bank, which serves as the U.S. central bank's main point of contact with Wall Street, from 1993 to 2003. His tenure was in some ways a test run for broader challenges his central-bank successors have dealt with over the last decade.

He confronted financial-sector troubles with public interventions, while overseeing the start of a greater level of transparency and showing a willingness to tackle economic issues that were outside of the Fed's core mission of keeping prices stable and job growth strong.

Outside of his steady leadership during and after the 9/11 attacks, Mr. McDonough's best-known and most controversial role was in helping broker a private-sector bailout of the imploding hedge fund Long-Term Capital Management in 1998.

The giant, secretive investment fund, founded by star traders and Nobel laureates heavily connected to key banks, threatened the stability of the world financial system after a series of trades went south. The Fed's intervention, which didn't involve public money, helped mitigate the crisis. But it also brought criticism from those who felt it was wrong for the central bank to help save wealthy investors from bad decisions.

Mr. McDonough started at the New York Fed in 1992 as head of its markets group, which deals directly with Wall Street and implements the monetary policy objectives of the U.S. central bank's interest-rate-setting Federal Open Market Committee.

Before joining the central bank, Mr. McDonough had a long career in banking. He retired from First Chicago Corp. and its bank First National Bank of Chicago in 1989 after two decades of work there. Before that, he worked at the U.S. State Department and served as a Navy officer.

After the New York Fed, he went on to lead the Public Company Accounting Oversight Board from 2003 to 2005. He was at one time among the names seen as a possible successor to Fed Chairman Alan Greenspan, who left the central bank in 2006.

He was succeeded as New York Fed president by Timothy Geithner, who later became President Barack Obama's first Treasury secretary.

Mr. McDonough drew praise for his 9/11 response. The World Trade Center attacks occurred less than half a mile from the New York Fed's fortresslike main office in lower Manhattan, and much of the bank's operations had to be moved to satellite offices.

Mr. McDonough also oversaw the bank as it confronted the Y2K computer bug problem. While the actual date change into the year 2000 proved to be a nonevent, the preparation in 1999 was anything but. Under his leadership, the New York Fed pumped liquidity into the banking system to ensure financial firms had enough cash to deal with potential problems related to computer glitches tied to the date.

The central banker served at the dawn of a long process that has seen the Fed move from being an institution shrouded in secrecy to one that is more open. For example, the Fed only began formally announcing changes in its interest-rate target in 1994. But progress toward transparency was slow under his leadership, before accelerating under Mr. Geithner.

Mr. McDonough, who largely mirrored the views of Mr. Greenspan on monetary policy issues, built a reputation as an early voice at the central bank warning about income inequality and other social issues he saw as complicating the economic landscape. He also raised concerns about Wall Street ethics, a topic that has been revisited by current New York Fed leader William Dudley.

Write to Michael S. Derby at michael.derby@wsj.com

Corrections & Amplifications

This item was corrected at 10:57 a.m. ET to clarify that Mr. McDonough died Tuesday, not Monday.

William McDonough, former president of the Federal Reserve Bank of New York, died Tuesday. "Former New York Fed Chief William McDonough, Who Guided Bank Through 9/11, Dies," published at 4:42 p.m. EST Thursday, incorrectly said Mr. McDonough died Monday in the first paragraph. (Jan. 26, 2018)

(END) Dow Jones Newswires

January 26, 2018 11:11 ET (16:11 GMT)