McDonough bows out from New York Fed

McDonough is also chairman of the Basel Committee on Banking Supervision, the international body co-ordinating the introduction of Basel II – the new set of global capital rules for banks due for implementation in late 2006. His work on Basel II drew praise from New York Fed chairman Peter Peterson, who said: “This has been a singular and enormously challenging achievement."

The Bank for International Settlements was unable to comment on McDonough’s replacement on the committee. Indeed, there is a possibility that he could continue chairing the committee after he has left the New York Fed, subject to multi-party approval. The New York Fed stated that McDonough intends to stay fully engaged in his work at the bank, including the finalisation of the revisions for Basel II, which are expected later this year.

McDonough has also won praise for his handling of the collapse of hedge fund Long Term Capital Management in 1998, which included the unwinding of thousands of derivatives transactions.

As vice-chairman and permanent voting member of the Federal Open Market Committee – the body that sets US monetary policy – McDonough was often touted as a potential successor to Federal Reserve Board chairman, Alan Greenspan. But his Democrat leanings were seen as an obstacle to such a move. Greenspan was full of praise for McDonough. “I will greatly miss Bill McDonough’s counsel and advice,” said Greenspan. “After a decade of exemplary service to the Federal Reserve System, his retirement will leave a pronounced void.”

Peterson echoed this sentiment. “He has made remarkable contributions to banking and the United States economy through his service at the New York Fed,” he said.

McDonough spent 22 years working in the banking industry before moving to the New York regulator. Between 1986 and 1991 he was vice-chairman of First Chicago Corp, the holding company of First National Bank of Chicago. He also spent five-year stints at the US State Department and the US Navy in the 1950s and 1960s.

McDonough holds a masters degree in economics from Georgetown University in Washington DC.