The Joy of Books

[Sent to my clients the morning of July 13th, 2022]

Good morning,

We have much to ponder: CPI; rates; energy; duration; volatility; market structure and now the lunacy of a Spanish windfall tax on banks, before the windfall of higher rates has been harvested.

All of these are important matters to which, like you, I’ve been giving much thought.

But today I want to talk about a dear friend of mine, Niall Coffey , who has died at the age of 46.

We met in September 2006: he as Chief Dealer of Foreign Exchange within the markets group at the FRBNY; me with strong opinions on my former employer (AIGFP), balance sheets, repo, collateral, counterparty risk and systemic/plumbing risk in general.

An Irishman and an Australian, brought together by a shared concern that we were headed for big trouble.

As Niall Coffey always teased me, I opened that first chat by explaining why I thought his home country, too, was going to implode and so began a non-stop, sixteen-year conversation about markets, economics, policy and life. As I have surveyed our voluminous correspondence, I am reminded of his passion, intensity, intelligence, and kindness. His eagerness and enthusiasm to explain his opinions sometimes came with a cantankerous edge: this did not always endear him to his consensus-building FRBNY colleagues, nor others but that style was just the survival instinct he learned growing up in Portmarnock.

As he wrote to me in March 2010: ‘James, honestly now. I was 28 years old with 5 years’ experience at AIB, Dublin. And I became Chief Dealer of FX at FRBNY? It’s not lost on me, believe me. It’s been very much to my benefit, but it shouldn’t have been me, by all logic and rights. I’m just a scrappy kid from the streets of Dublin who ended up sitting at the table with Geithner and co., while frequently wondering how the hell it happened or why they wanted to listen to me.’

There could be no doubting Niall’s heart of gold, and good intentions: he was always an immensely generous and thoughtful friend. Not long after our first conversation, Niall insisted I add a vast number of his (often very high office) Federal Reserve colleagues to my distribution list. I was nervous of that, but he assured me they needed to hear what I knew, and I owed it to the financial system to try: ‘we need to expand your sphere of connectivity’. Thanks entirely to Niall, from early 2007 onwards I also found myself briefing many of his FRBNY Markets Division colleagues, and then important people at The Board. I shall forever be grateful to him for having such an opportunity, during a time of immense consequence.

Niall did not come up with the dollar swap lines in 2008, but he and his colleagues facilitated them, at scale and with speed. That they were able to do so was not just down to the wisdom and guidance of Don Kohn, nor the important if overlooked global coordination role of Guy Debelle: it was also down to the relationships Niall and his colleagues had built with their global peers.

And there was no relationship more important than The Bank of Japan’s New York office, located across the road from the FRBNY. Thanks to Niall Coffey, I still think of that small office as the most systemically beneficial central bank branch.

Not that markets knew it then- nor do they know it now – but the financial system remains indebted to Niall’s passion and intelligence during 2008. There are precious few people of whom that can be said, but Niall is one of them.

He was also a great patriot: as Chief Dealer of Foreign Exchange at the FRBNY, of course he was, but let me explain. He shared many general anecdotes from his experiences at the FRBNY, but not once, not ever across sixteen years did he betray any confidences. Sure, there were many disappointments but unlike one of his former bosses, there was no gossip, there were no leaks. He took his job immensely seriously, and woe betide anybody who dared critique dollar hegemony, or the rule of law or deep, generally liquid financial markets that (still) underpin that hegemony. From time to time, I’d tease him by asking whether the renminbi could be a reserve currency, or whether some sort of digital coin could replace the dollar. He knew I was teasing him, but the vehemence of his response was something to behold. Alongside many impressive, still unknown and now largely retired women and men, the FRBNY had acted forcefully to underpin the western financial system. Niall could never understand why, within a year, speculators showed their gratitude by coming up with bitcoin. His contempt for it knew no bounds. Likewise, perhaps scarred by certain experiences, he was scathing about the prospects of the renminbi as a reserve currency. He would be both delighted and unsurprised that the euro is once again testing parity.

Every conversation with Niall Coffey reminded me that what we in markets see, and what we transact in is just the tip of an enormous, institutional iceberg that underpins the financial system. We live in the age of machines, to execute, to invest and yes even to speculate, but it is people who keep the lights on. Not just on the funding and markets side, but also in critical payments infrastructure as well. Think of all those women and men who worked tirelessly and anonymously for us in 2007 and especially 2008, often at great personal cost. Not all of it was perfect, but how could it have been? They tried and continue to try their best: while we will continue to aggressively critique their decisions and actions, I am always grateful for the Niall Coffeys in this world.

His favourite wine was Cos d’Estournel, which he sometimes gifted to his friends. He’d correctly identified it was both well made, and decent value. The next time you’re out for dinner, you may spot a bottle. Savour it, and perhaps take a moment to reflect on everything all the unheralded, unknown central bankers try to do for us.

Numbers drive our business: is the price going up, is the price going down, what’s not in the price? It is price that determines our performance, capital accumulation then long-run capital preservation. I wonder whether we sometimes forget, though, that finance is actually a people business: who do you trust? Trusting Niall was an easy decision; but by trusting me, and by introducing me to so many important people, he honoured me – and gave me – so much more.

Niall’s funeral [was on July 14th], in Dublin. A few of us [were] there to remind his father, Eamon, his brother Gerard and his oldest friends how loved and respected he was. As hard as that will be, please focus your thoughts on Niall’s twin daughters, Emma and Adelaide, aged six. When they are older we will ensure they are fully briefed about their amazing Dad.

The last three years have been a non-stop test of resilience: some of us have lost parents, too many of us have lost friends. It’s been relentless.

Unexpected silence from a voluble friend and voluminous correspondent could be a sign of trouble: check in on that friend, today.

Do chara,

JA