Long Term Capital Management Crony Dies

From the Wall Street Journal obituary:

David W. Mullins Jr. had a soaring career as a finance professor at Harvard, a senior Treasury official under President George H.W. Bush and vice chairman of the Federal Reserve Board. He helped clean up after the widespread collapse of savings and loan institutions in the late 1980s and steered the Federal Reserve to lower interest rates in the early 1990s. He was seen as a possible future Fed chairman.

Then, in a surprise career shift in 1994, he jumped to a job as a partner at Long-Term Capital Management, which had what was considered one of the brainiest finance teams ever assembled. The hedge fund operator’s mammoth losses four years later created a blot on his career, even though he wasn’t charged with any wrongdoing.

Dr. Mullins then held lower-profile jobs, including chief economist at Vega Asset Management.

He died Monday after emergency heart surgery in Naples, Fla. He was 71.

In a rare comment on the Long-Term Capital debacle, he told the New York Times in 2000: “One of the big lessons is that the world changes. There will always be some event that you can’t foresee.” For Long-Term Capital, it was a default on Russian bonds that panicked traders around the world.

And during his period at the Fed, he was a typical "pragmatic" money printer.

WSJ again:

 At the Federal Reserve in the early 1990s, Dr. Mullins was credited with helping persuade Chairman Alan Greenspan to back a strategy that reduced interest rates to their lowest point in nearly three decades to spur a sluggish economy. “It’s not that he is in a battle with Greenspan,” William Seidman, a former bank regulator, said at the time. “It’s that for every statistic or number that Greenspan quotes, he can quote one, too.”

In a 1991 interview with the Federal Reserve Bank of Minneapolis, Dr. Mullins depicted himself as pragmatic. “I don’t adhere to a doctrinaire, rigid, simple theory of how monetary policy is supposed to work,” he said.

  -Robert Wenzel