Unstructured Finance

Paul after PIMCO


By Jennifer Ablan and Matthew Goldstein

Paul McCulley says working at bond giant PIMCO was like being in Camelot. But in some ways, Bill Gross’s former top Federal Reserve watcher seems a lot happier and more at peace with himself since leaving the Newport Beach, Calif.-based firm at the end of 2010.

These days McCulley, who is credited with coining the phrase “shadow banking” to describe the role Wall Street banks and hedge funds play in pumping liquidity into the financial system, looks more like a professor at some liberal arts college than a once mighty money manager of some $50 billion.

His hair is long—down to his shoulders. He sports a beard and has lost 20 pounds. He regularly walks 8 miles a day and spends as much time fishing as he does thinking about ways to get the U.S. economy out of its current liquidity trap—a situation in which all the Fed’s priming of the pump does little until consumers can get relief from all the mortgage and credit card debt they accumulated in the past decade.

McCulley decided to leave PIMCO shortly after he got nixed from consideration by President Obama for a Federal Reserve governorship. McCulley doesn’ t like to talk about the consideration process but he admits that he always dreamed of being on the Fed.

But during a recent visit at his home, which sits on a lagoon and provides easy access to his two boats—Minksy Moment, an 18 foot electric Duffy boat,  and Moral Hazard, a 32 foot restored 1992 Blackfin fishing boat—McCulley says he’s moved beyond the thought of working for the central bank. He’s now putting much of his energies into private philanthropy, funding some start-up ventures and working as a senior fellow with the Global Interdependence  Center, a Philadelphia-based think tank.