By Harry Keaney
Among Irish Americans, William J. McDonough is among the most powerful and influential — and yet he remains among the least well-known.
As president and chief executive officer of the Federal Reserve Bank of New York, McDonough serves as vice-chairman and a permanent member of the federal open market committee, the group responsible for formulating U.S. monetary policy.
The 12-member federal open market committee is the Federal Reserve’s main policymaking arm. The committee comprises seven federal reserve system governors, all of whom are voting members. The other five members are the presidents of five federal reserve banks throughout the U.S. The president of the New York Fed –McDonough since July 1993 — always votes; the other four votes rotate.
McDonough is, therefore, among a dozen people whose opinions on business and economic matters — on topics ranging from interest rates on mortgages and credit card bills to the perceived strength of the U.S. economy, not only within America but throughout the world — affect everyone
On Nov. 17, in an effort to inoculate the U.S. against recession and further financial-market disruptions, the Federal Reserve decided, in private, as usual, to cut short-term interest rates for the third time in seven weeks. The day after, in his 10th floor office atop the New York Federal Reserve Bank’s full-block, cathedral-like edifice on Liberty Street in lower Manhattan, McDonough declined to discuss the decision. He couldn’t, he said, because of a mandatory blackout period on such discussion following Federal Reserve decisions.
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But he was more than willing to outline his Irish ancestry. His mother, Mary Ann Gallagher, was born in Ballina, Co. Mayo; his father, Bartholomew, a native of the townland of Lissergool, between Frenchpark and Ballaghaderreen, in County Roscommon.
McDonough himself was born in Chicago in 1934. When he was 10, his mother died. The following year, his father, an insurance agent for Prudential, also passed away.
While attending Holy Cross College, in Worcester, Mass., McDonough realized he liked economics. In 1956, he graduated with a bachelor’s degree.
He joined the Navy, was stationed in Annapolis, taught during the day and attended graduate school in the evening.
From 1961 to 1967, he worked as a foreign service officer with the U.S. State Department. In 1962, he obtained a master’s degree in economics from Georgetown University in Washington, D.C.
McDonough then embarked on a 22-year career with the First Chicago Corporation and its bank, First National Bank of Chicago. During part of this time, he was based in London, overseeing the bank’s business in the Middle East and Africa. The St. Stephen’s Green, Dublin, branch of the bank also came under his jurisdiction. When he retired from First Chicago in 1989, he was vice-chairman of the board and a director of the bank holding company.
He joined the New York Federal Reserve Bank in January 1992 as executive vice-president. Subsequently, he became head of the bank’s markets group and the manager of open market operations for the federal open market committee.
McDonough is a regular visitor to Ireland. Among his friends there is Maurice O’Connell, the governor of the central bank of Ireland.
“I know Bill of old,” O’Connell, a native of Kerry, told the Echo. O’Connell added that McDonough enjoys “a very high reputation internationally,” not least because he had contributed to change in the banking regulatory system. He pointed out McDonough’s membership of the board of directors of the Bank of International Settlements, and his chairmanship of the Basle Committee on Banking Supervision
“He really is a senior figure in the banking elite,” O’Connell said of McDonough.
The clout McDonough wields on Wall Street and Washington was evident toward the end of September. When the New York Federal Reserve’s No. 2 man, Peter Fisher, confirmed that the Greenwich, Conn.-based hedge fund Long-Term Capital Management was on the verge of collapse, possibly bringing U.S. and world financial markets down with it, McDonough, having delivered a speech in London, was taking a leisurely walk in one of the city’s parks. He immediately flew home, and after consultations with Fisher, Treasury Secretary Robert Rubin and Federal Reserve Chairman Alan Greenspan, pulled together some of the biggest names on Wall Street to formulate a massive $3.625 billion recapitalization of Long-Term Capital.
But at an age when many people think of retirement, the crown jewel of McDonough’s career may still be in the making. That’s because the 64-year-old Irish American is seen by some as a potential successor to 72-year-old Greenspan as Federal Reserve chairman.