Congress and Greenspan ignored Ed Gramlich

19 months ago, the world lost an economist who fought mightily to prevent our current Great Recession:

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…

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.”

Posted by James on Thursday, April 16, 2009