|Birth: ||Jun. 18, 1939|
New York, USA
|Death: ||Sep. 5, 2007|
District Of Columbia, USA
Sept. 5 (Bloomberg) -- Edward M. Gramlich, the former Federal Reserve governor who pushed Chairman Alan Greenspan to strengthen the central bank's oversight of banks before the record U.S. mortgage boom, has died. He was 68.
Gramlich's wife, Ruth, notified the Urban Institute today of her husband's death, said spokesman Stuart Kantor. Gramlich was a senior fellow at the institute. He had been receiving treatment for chronic lymphocytic leukemia since 2002.
Inside the Fed, ``Ned'' Gramlich was known as a pragmatic economist who lightened the seriousness of discussions with humor and common sense. He was also a policy activist who piloted two measures to enhance disclosures and protections on high-cost home loans and dissented in voting for an interest- rate cut in 2002.
``His contributions to the Federal Reserve were broad and significant, including his leadership in consumer protection issues, his work to restructure the discount window, and his expertise and judgment in the making of monetary policy,'' Fed Chairman Ben S. Bernanke said in a statement. ``Those who knew him will miss not only his penetrating insight and shining intelligence but also his great wit and warmth.''
Gramlich was appointed by President Bill Clinton and served from November 1997 until August 2005, a period that encompassed the collapse of Long-Term Capital Management, the Sept. 11 terrorist attacks and the deflation scare of 2003. After resigning from the Fed, Gramlich was an interim provost at the University of Michigan and then joined the Urban Institute in Washington as a senior fellow.
The former Fed governor returned to the spotlight this year with a book on the subprime mortgage market, which was roiled by surging delinquencies and foreclosures, a result in part of lax lending practices, officials now acknowledge. Gramlich's book, ``Subprime Mortgages, America's Latest Boom and Bust,'' outlined several options for policy makers.
``I am deeply saddened by the passing of Ned Gramlich, one of the most decent people I have ever encountered,'' Greenspan said in an e-mailed statement. ``His wit and insights will be missed.''
By the standards of a Fed that promoted ``self-regulation'' by financial institutions and shunned social objectives, Gramlich was an unusual governor at the Greenspan Fed. He stated his creed at his September 1997 nomination hearing, when he told lawmakers that ``both economic and social goals are important.''
`How to Balance'
``Sometimes one's advice must be weighted toward economic practicality, sometimes toward humanity,'' Gramlich told the Senate Banking Committee. ``A good economist should know how to balance both objectives.''
Gramlich applied that approach in trying to broaden the Fed's oversight of subprime mortgage lending in 2000, to examine the home-loan units of banks under the central bank's jurisdiction.
That was before the 2004-2006 boom when, as Bernanke has said, some lenders compromised standards. Delinquencies and foreclosures have since climbed and lawmakers have threatened to strip the Fed's authority if it doesn't enact tougher rules.
``I was proposing that we do more intensive supervision of the subsidiaries and Greenspan opposed it, and there we were,'' Gramlich said in an interview in June, adding that the proposal never went to the Board of Governors after he submitted it to Greenspan. ``I was hoping that the Fed would be a leader.''
Gramlich was too ill to attend the Fed's annual retreat in Jackson Hole, Wyoming, last week, though he still submitted a speech for the event. David Wilcox, an official in the Fed's research division, presented his remarks. Bernanke, who served as a governor with Gramlich before becoming chairman, praised him in his opening remarks.
Edward Gramlich was born in Rochester, New York, on June 18, 1939. His father worked as an engineer for Eastman Kodak Co. and his mother was a homemaker. A lifelong sports enthusiast, he served as a batboy for one of the St. Louis Cardinals baseball team's minor-league affiliates.
He earned a bachelor's degree from Williams College in 1961 then went on to get a master's and Ph.D. at Yale University.
Gramlich started his Fed career in 1965, in the research division. He later served in the White House Office of Economic Opportunity in the 1970s and joined the Congressional Budget Office, where he became deputy director in 1986.
Gramlich's career path showed ``he was a person who was concerned about doing right for those who are less advantaged,'' said Robert Reischauer, president of the Urban Institute and former CBO director, who added that the former Fed official always had time for junior staff. ``This is a town where you really don't find that very often.''
He was staff director for the Economic Study Commission on major-league baseball, a blue-ribbon panel set up to find ways to bolster financially troubled teams. In 1992, it recommended a program for richer teams to channel some of their profits to poorer teams. Baseball adopted such a revenue-sharing plan following a strike in 1994.
He similarly led a federal advisory committee on Social Security from 1994 to 1996, though lawmakers and successive administrations have failed to overhaul the government-run retirement program.
Gramlich was dean of the School of Public Policy at the University of Michigan from 1995 through 1997 and headed the school's Institute of Public Policy Studies.
After joining the Fed Board, Gramlich headed its consumer affairs committee, overseeing an initiative to get lenders to compile detailed information on higher-risk loans.
What emerged was a demographic breakdown of the high-cost loan market, which showed that blacks and Hispanics had disproportionately high rates of such contracts. The figures spurred U.S. legislators to push the Fed and other regulators to crack down on suspicions of racism.
In discussions on interest rates at the FOMC, Gramlich often eased tension with humor, sometimes sprinkling his analysis with references to baseball.
``I would always look forward to his comments,'' said J. Alfred Broaddus Jr., former president of the Richmond Fed. ``He was very clever in a subtle way. He had a way of parodying things that was never condescending. It made a huge difference in the atmosphere of that room.''
Gramlich joined former Dallas Fed president Robert McTeer in September 2002 to dissent in favor of cutting interest rates as the economy struggled to gain traction after the 2001 recession. The disagreement was an unusual challenge in the latter years of the Greenspan Fed.
``Dissenting is rarer for a governor than a president, and dissenting in a dovish direction was rarer still,'' McTeer said.
Lowering `Ego Level'
He noted Gramlich agreed to sign on to McTeer's write-up of his rationale for the vote, to be included in official minutes of the gathering, instead of writing his own.
``That doesn't sound like a big thing until you consider the average ego level among the governors, which he brought down considerably,'' McTeer said.
Two months later, the full committee voted to lower the benchmark rate by half a percentage point to 1.25 percent, a 41- year low.
``He had sharp analytical skills,'' said William Poole, president of the St. Louis Fed bank. ``He had tremendously good sense. At Federal Open Market Committee meetings, he always had something worthwhile to say and he said it in a way of authority, but with humility.''
A sportsman who played golf and tennis with his colleagues, Gramlich once had to manage discussions about potential aid for United Airlines Inc. on a hike in the Catskill Mountains.
Gramlich chaired a board set up after the Sept. 11 attacks to administer $10 billion of government loan guarantees for financially troubled air carriers. While walking through the New York state park in the rain on his birthday, Gramlich slipped on a rock and suddenly found a pocket of mobile-phone reception. He spent the next 45 minutes talking about United, he said in an August 2005 interview.
Gramlich also led an overhaul of the discount rate, a lesser-used tool that regained prominence during last month's credit-market upheaval. The rate the Fed charges banks for loans is now set at a penalty, instead of a discount, to the cost of funds banks lend each other. The change was meant to end a stigma about the discount window as a bailout facility. The Fed cut the rate Aug. 17 to help boost liquidity and market confidence.
Gramlich is survived by his wife; two children, Sarah and Robert, six grandchildren, his parents, two brothers and a sister, according to the Urban Institute.
Craig Torres in Washington at Bloomberg: Ctorres3@bloomberg.net
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