Fed Governor Edward M. Gramlich

Edward M. Gramlich warned frequently about subprime mortgages and predatory lending, which he said
Edward M. Gramlich warned frequently about subprime mortgages and predatory lending, which he said "jeopardize the twin American dreams of owning a home and building wealth." (By The Urban Institute)
By Patricia Sullivan
Washington Post Staff Writer
Thursday, September 6, 2007

Edward M. Gramlich, 68, a former Federal Reserve governor who unsuccessfully pushed Fed Chairman Alan Greenspan to crack down on irrational lending before the mortgage boom, died of leukemia Sept. 5 at the Washington Home and Community Hospices. He was a Washington resident.

Dr. Gramlich, who served on the Board of Governors of the Federal Reserve System from 1997 to 2005, was surprised this spring by the diagnosis of acute myeloid leukemia, an advanced cancer of the white blood cells. It was his second bout with leukemia. Ever the pragmatic economist, he considered the costs and benefits of an experimental treatment but ultimately rejected it.

In June, Dr. Gramlich published "Subprime Mortgages: America's Latest Boom and Bust" on a topic that he had warned about for years. Much earlier, as chairman of the Neighborhood Reinvestment Corp., he had urged lawmakers to better protect consumers against predatory lending practices and toughen the regulation of mortgage lenders and banks, calling the mortgage process "confusing, costly and far less than optimal."

He continued that campaign as a Fed governor; in December 2000, he was among those who wanted to tighten regulation of high-cost home loans long before the current panic set in.

But as the liberal Democrat at a Fed that relied on industry self-regulation and shunned social objectives, Dr. Gramlich's view did not often carry the day. In 2002, he again sounded the alarm, saying that the practices of subprime lenders, such as charging excessive fees and refinancing just to collect more fees, "jeopardize the twin American dreams of owning a home and building wealth."

After resigning from the Fed in 2005, Dr. Gramlich became interim provost at the University of Michigan and then a senior fellow at the Urban Institute in Washington, where he focused his work on community development, affordable housing and entitlement issues. The institute's president, Robert D. Reischauer, once said of him: "Ned is to the policy community what an Olympic gold medal decathlete is to the world of sports."

Fed Chairman Ben S. Bernanke, who had served on the board with Dr. Gramlich, praised his leadership in consumer-protection issues and his work to restructure the discount window. "Those who knew him will miss not only his penetrating insight and shining intelligence but also his great wit and warmth," Bernanke said in a statement.

Edward Martin Gramlich was born in Rochester, N.Y., and graduated from Williams College in Massachusetts. He received a master's degree in 1962 and a doctorate in 1965, both from Yale University. His spent his early career in the research division at the Federal Reserve.

He had a long career at the University of Michigan, where he was a professor of economics and public policy from 1976 to 1997, dean of the School of Public Policy from 1995 to 1997, chairman of the economics department twice in the 1980s and director of the Institute of Public Policy Studies from 1979 to 1983 and 1991 to 1995.

He was also staff director for Major League Baseball's economic study commission in 1992. After the 1994 strike, he recommended that richer teams funnel some profits to poorer teams.

Dr. Gramlich was an acting director of the Congressional Budget Office in 1986 and 1987 and chairman of the Social Security advisory commission from 1994 to 1997. After the Sept. 11, 2001, attacks, he was chairman of the Air Transportation Stabilization Board, charged with administering $10 billion in government loan guarantees for financially strapped airlines.

At the time he was appointed to the Fed, friends described him as "tall, gangly and easy to get along with," and he was known for lightening the mood during discussions of interest rates at the Federal Open Market Committee. He was also willing to dissent, a rare stance at the Fed, but one he took in 2002 over cutting interest rates.

"Sometimes, one's advice must be weighted toward economic practicality, sometimes toward humanity," he said during his nomination hearing in September 1997. "A good economist should know how to balance both objectives."

Survivors include his wife of 43 years, Ruth Gramlich of Washington; two children, Sarah Howard of East Greenbush, N.Y., and Robert Gramlich of Bethesda; his parents, J. Edward and Harriett Gramlich of Pittsford, N.Y.; a sister, Robin Gordon of Great Neck, N.Y.; two brothers, Jack Gramlich of Baldwinsville, N.Y., and Fred Gramlich of Alexandria; and six grandchildren.

© 2007 The Washington Post Company