David Wiley Mullins Jr. (April 28, 1946 – February 26, 2018) was an American economist who served as the 14th vice chairman of the Federal Reserve from 1991 to 1994. Prior to his term as vice chairman, Mullins served as a member of the

Federal Reserve Board of Governors The Board of Governors of the Federal Reserve System, commonly known as the Federal Reserve Board, is the main governing body of the Federal Reserve System. It is charged with overseeing the Federal Reserve Banks and with helping implement the mo ...

, taking office in 1990. Before his appointment to the

Federal Reserve The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of ...

, he served as the

under secretary of the treasury for domestic finance The under secretary of the treasury for domestic finance is a high-ranking position within United States Department of the Treasury that reports to, advises, and assists the secretary of the treasury and the deputy secretary of the treasury. The ...

under President

George H. W. Bush George Herbert Walker BushBefore the outcome of the 2000 United States presidential election, he was usually referred to simply as "George Bush" but became more commonly known as "George H. W. Bush", "Bush Senior," "Bush 41," and even "Bush th ...

. Mullins left the government service to join the

hedge fund A hedge fund is a Pooling (resource management), pooled investment fund that holds Market liquidity, liquid assets and that makes use of complex trader (finance), trading and risk management techniques to aim to improve investment performance and ...

Long Term Capital Management Long-Term Capital Management L.P. (LTCM) was a highly leveraged hedge fund. In 1998, it received a $3.6 billion bailout from a group of 14 banks, in a deal brokered and put together by the Federal Reserve Bank of New York. LTCM was founded in 1 ...

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. His father worked for

Auburn University Auburn University (AU or Auburn) is a Public university, public Land-grant university, land-grant research university in Auburn, Alabama, United States. With more than 26,800 undergraduate students, over 6,100 post-graduate students, and a tota ...

until 1960, when he became the president of the University of Arkansas. David Jr. was raised in

Fayetteville, Arkansas Fayetteville ( ) is the List of cities and towns in Arkansas, second-most populous city in the U.S. state of Arkansas, the county seat of Washington County, Arkansas, Washington County, and the most populous city in Northwest Arkansas. The city ...

, along with his brother Gary and sister Carolyn. Mullins left Arkansas for Yale and went on to study finance at the

MIT Sloan School of Management The MIT Sloan School of Management (branded as MIT Sloan) is the business school of the Massachusetts Institute of Technology, a private university in Cambridge, Massachusetts. MIT Sloan offers bachelor's, master's, and doctoral degree progra ...

. 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 A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value. In the 19th and early 20th centuries, many financial crises were associated with Bank run#Systemic banki ...

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. The commission was to be an inquiry into the stock market crash of October 19, 1987, known as

Black Monday Black Monday refers to specific Mondays when undesirable or turbulent events have occurred. It has been used to designate massacres, military battles, and stock market crashes. Historic events *1209, Dublin – when a group of 500 recently arriv ...

. 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. The Brady Report laid some of the blame on derivatives trading and

portfolio insurance Portfolio insurance is a hedging strategy developed to limit the losses an investor might face from a declining index of stocks without having to sell the stocks themselves. The technique was pioneered by Hayne Leland and Mark Rubinstein in 1976. ...

mechanisms, with much of that focus being generated by Mullins.Lowenstein, pp. 37 Brady went on to serve as Secretary of the Treasury. As the

savings and loan crisis The savings and loan crisis of the 1980s and 1990s (commonly dubbed the S&L crisis) was the failure of approximately a third of the savings and loan associations (S&Ls or thrifts) in the United States between 1986 and 1995. These thrifts were b ...

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. In 1989, Mullins was appointed by President Bush as assistant Secretary of the Treasury for domestic finance. While at the Treasury, Mullins co-wrote a paper on

high-yield debt In finance, a high-yield bond (non-investment-grade bond, speculative-grade bond, or junk bond) is a bond that is rated below investment grade by credit rating agencies. These bonds have a higher risk of default or other adverse credit even ...

defaults which received the inaugural

Smith Breeden Prize ''The Journal of Finance'' is a peer-reviewed academic journal published by Wiley-Blackwell on behalf of the American Finance Association. It was established in 1946. The editor-in-chief is Antoinette Schoar. According to the ''Journal Citation Rep ...

. 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. Mullins was seen as the Fed's "resident intellectual" due to his background as a professor in finance and economics. In 1994, Mullins resigned to join John Meriwether's new hedge fund,

(LTCM). Although his term was to come to a close, the resignation was viewed as unexpected. At LTCM, Mullins joined what ''

Business Week ''Bloomberg Businessweek'', previously known as ''BusinessWeek'' (and before that ''Business Week'' and ''The Business Week''), is an American monthly business magazine published 12 times a year. The magazine debuted in New York City in Septembe ...

'' termed a "dream team" of financial experts and academics, including Nobel laureates

Myron Scholes Myron Samuel Scholes ( ; born July 1, 1941) is a Canadian– American financial economist. Scholes is the Frank E. Buck Professor of Finance, Emeritus, at the Stanford Graduate School of Business, Nobel Laureate in Economic Sciences, and co-ori ...

and

Robert C. Merton Robert Cox Merton (born July 31, 1944) is an American economist, Nobel Memorial Prize in Economic Sciences laureate, and professor at the MIT Sloan School of Management, known for his pioneering contributions to continuous-time finance, especia ...

Roger Lowenstein Roger Lowenstein (born 1954) is an American financial journalist and writer. He graduated from Cornell University and reported for ''The Wall Street Journal'' for more than a decade, including two years writing its '' Heard on the Street'' column, ...

, 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. 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. Following that fund's collapse in 1998 and dissolution in 2000, Mullins left LTCM and worked for financial services companies. Mullins' career in government was effectively ended by the collapse. In 2008 he was chief economist of the hedge fund Vega Asset Management.

Death

Mullins Jr. died unexpectedly during an emergency heart surgery in

Naples, Florida Naples is a city in Collier County, Florida, United States. As of the 2020 United States census, 2020 census, the population was 19,115, down from 19,539 at the 2010 census. Naples is a principal city of the Collier County, Florida, Naples–Marc ...

, on February 26, 2018.

Notes

References

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External links