David W. Mullins, Jr.

David W. Mullins, Jr.
Vice Chairman of the Federal Reserve
In office July 24, 1991 – February 14, 1994
Nominated by	George H. W. Bush
Preceded by	Manuel H. Johnson
Succeeded by	Alan S. Blinder
Board of Governors of the Federal Reserve System
In office May 21, 1990 – February 14, 1994
Nominated by	George H. W. Bush
Personal details
Born	David Wiley Mullins, Jr. April 28, 1946 Memphis, Tennessee
Nationality	American
Alma mater	Yale University (B.S.) MIT (Ph.D.)

David Wiley Mullins, Jr. (born April 28, 1946) is an American economist and former vice-chairman of the Federal Reserve. He also served as an assistant Secretary of the Treasury for domestic finance in the administration of United States President George H. W. Bush. Mullins left the Federal Reserve in 1994 to join the hedge fund Long Term Capital Management and remained in private finance following its collapse in 1998.

Early life

David Mullins was born on April 28, 1946 to David Wiley Mullins and his wife Eula in Memphis, Tennessee.^[1] His father worked for Auburn University until 1960, when he became the president of the University of Arkansas.^[2] David Jr. was raised in Fayetteville, Arkansas, along with his brother Gary and sister Carolyn.^[3] Mullins left Arkansas for Yale and went on to study finance at the MIT Sloan School of Management. In 1974 he earned his Ph.D. from MIT and accepted a position in the faculty of Harvard Business School as an expert in financial crises.^[4]

Career

Immediately after the market crash in 1987, President Reagan tapped Nicholas F. Brady, a former United States senator and then chairman of Dillon, Read, to chair the Presidential Task Force on Market Mechanisms, later known as the Brady Commission. Brady recruited Harvard Business School professor Robert R. Glauber as the commission's executive director, and Glauber in turn enlisted Mullins, a Harvard faculty colleague, as associate director. <Report of the Presidential Task Force on Market Mechanisms, p. ii> The commission was to be an inquiry into the stock market crash of October 19, 1987, known as Black Monday.^[5] In two months, Mullins helped assemble nearly 50 people to produce the report, which provided the first official record of what caused the crash and offered recommendations on how to fix the deficiencies in the market.^[6] The Brady Report laid some of the blame on derivatives trading and portfolio insurance mechanisms, with much of that focus being generated by Mullins.^[7][8]

Brady went on to serve as Secretary of the Treasury. As the savings and loan crisis deepened, he turned to Mullins, now an assistant Secretary of the Treasury, to develop a plan to resolve the crisis. The plan was enacted by Congress on August 8, 1989 as FIRREA (The Financial Institutions Reform Recovery and Enforcement Act of 1989) which created the RTC to dispose of failed thrift assets. The RTC ultimately sold $394 billion in assets of 747 failed thrifts. This approach became a model for banking resolution plans in Sweden, Thailand and elsewhere. Mullins remained popular with Congress and the President.^[9] In 1989, Mullins was appointed by President Bush as assistant Secretary of the Treasury for domestic finance.^[1][10] While at the Treasury, Mullins co-wrote a paper on high-yield debt defaults which received the inaugural Smith Breeden Prize.^[11][12]

On May 21, 1990, Bush nominated Mullins to a 14-year term on the Federal Reserve Board of Governors to fill a vacancy left by the resignation of H. Robert Heller.^[13][14] Mullins was seen as the Fed's "resident intellectual" due to his background as a professor in finance and economics.^[15] In 1994, Mullins resigned to join John Meriwether's new hedge fund, Long Term Capital Management (LTCM). Although his term was to come to a close, the resignation was viewed as unexpected.^[16][17]

At LTCM, Mullins joined what Business Week termed a "dream team" of financial experts and academics, including Nobel laureates Myron Scholes and Robert C. Merton.^[18] Roger Lowenstein, author of When Genius Failed: The Rise and Fall of Long-Term Capital Management, argued that some prospective investors in LTCM were swayed by the presence of Mullins.^[7] Just as the celebrity of Scholes and Merton caused investors and trading partners to exercise less diligence, Mullins' addition as a "marquee" name added gravitas to the firm.^[19] Following that fund's collapse in 1998 and dissolution in 2000, Mullins left LTCM and worked for financial services companies.^[20][21] Mullins' career in government was effectively ended by the collapse.^[22] In 2008 he was chief economist of the hedge fund Vega Asset Management.^[23]

Notes

1. Woolley, John T.; Peters, Gerhard (March 8, 1989). "Nomination of David W. Mullins, Jr., To Be an Assistant Secretary of the Treasury". The American Presidency Project [online]. University of California, Santa Barbara. Retrieved 2008-10-29.
2. "Information about David W. Mullins". David W. Mullins Papers. University of Arkansas. Retrieved 2008-10-29.
3. Blustein, Paul (November 30, 1989). "Bush Eyes Treasury Official for Fed Post". The Washington Post. pp. D1.
4. Dunbar, Nicholas (2000). Inventing Money: The story of Long-Term Capital Management and the legends behind it. New York: Wiley. pp. 132–133. ISBN 0-471-89999-2.
5. Dunbar, pp. 133–134
6. Glaberson, William (February 14, 1988). "A Task Force Plays Beat the Clock". The New York Times. pp. Section 3; Page 4. Retrieved 2008-10-29.
7. Lowenstein, pp. 37
8. Gosselin, Peter G. (February 2, 1994). "Fed vice chairman Mullins quits". The Boston Globe. p. 39.
9. Robinson, John (February 26, 1989). "A taste of the 'Harvard boutique'". The Boston Globe. pp. A1.
10. Kilborn, Peter T. (February 2, 1989). "Big Slices of Authority For 2 Brady Assistants". The New York Times. pp. D18. Retrieved 2008-10-29.
11. "Abstracts of Smith Breeden Prize Winning Papers (1989)". American Finance Association. Retrieved 2007-09-11.
12. Mullins, David W.; Wolff, Eric D.; Asquith, Paul (1989). "Original Issue High Yield Bonds: Aging Analyses of Defaults, Exchanges, and Calls". Journal of Finance (The American Finance Associtation) 44 (4): 923–952. doi:10.2307/2328617. JSTOR 2328617.
13. "People behind the policy at the Federal Reserve". USA Today. April 9, 1991. pp. 2B.
14. Rosenbaum, David E. (November 30, 1989). "Treasury Official Seen As Choice for Fed Seat". The New York Times. pp. D2. Retrieved 2008-10-29.
15. Nasar, Sylvia (June 9, 1991). "The New Intellectuals at the Fed". The New York Times. pp. Section 3; Page 1. Retrieved 2008-10-29.
16. Dunbar, pp. 142
17. Berry, John M. (February 2, 1994). "Vice Chairman Of Fed Resigns Unexpectedly". The Washington Post. pp. F1.
18. Nathans Spiro, Leah (August 29, 1994). "Dream Team". Business Week. p. 50.
19. O'Brian, Timothy L.; Holson, Laura M. (October 23, 1998). "BLIND TRUST: A special report.; A Hedge Fund's Stars Didn't Tell, And Savvy Financiers Didn't Ask". The New York Times. pp. A1.
20. Henriques, Dana B. (June 19, 1999). "Hedge Fund To Cash Out Original Stakes". The New York Times. pp. C1.
21. Lowenstein, pp. 227
22. Lowenstein p. 176–177
23. "Remember These Guys?". Business Week. June 12, 2006. p. 57.

References

• Dunbar, Nicholas (2000). Inventing Money: The story of Long-Term Capital Management and the legends behind it. New York: Wiley. ISBN 0-471-89999-2.
• Lowenstein, Roger (2000). When Genius Failed: The Rise and Fall of Long-Term Capital Management. Random House. ISBN 0-375-50317-X.

Further reading

• "Brady Report" Presidential Task Force on Market Mechanisms (1988): Report of the Presidential Task Force on Market Mechanisms. Nicholas F. Brady (Chairman), U.S. Government Printing Office.
• MacKenzie, Donald (2006). An Engine, not a Camera: How Financial Models Shape Markets. The MIT Press. ISBN 0-262-13460-8.

External links

• Statements and Speeches of David W. Mullins