The origins of the crisis as perceived by Anna J. Schwartz


Anna J. Schwartz is one of those human beings whose charm nobody who meets her personally can resist.

For more years than I’d like to admit, I took classes in the CUNY Grad Center building located on the northeastern corner of 5th Avenue and 34th Street in Manhattan.  The economics department office was located on the 5th floor, sandwiched between the offices of the National Bureau of Economic Research and the Howard Samuels Center.  So, rather frequently, one would run into this beautiful woman in her late 80s/early 90s, on the halls or at the commons.  Invariably, she’d be dressed up, elegant, and serious.   I doubt she ever missed a day of work at the NBER since she joined it at some point during WWII.

Traditionally, as it continues to do, the economics department would jointly organize a weekly-session seminar along with the NBER.  A few times, Anna would attend the sessions.  And if you took the course in American economic history, she’d occasionally lecture, particularly on the monetary history of the Great Depression.   Anna and Milton Friedman wrote what a few (the latest being perhaps Hugo Kaufmann), a bit too obsequiously for my taste, have called “the definitive monetary history of the U.S.”

I don’t think anybody ever writes any definitive history of anything.  And it’s always seemed to me that Friedman and Schwartz significantly overestimated the role of monetary policy in leading to, and failing to prevent, the Great Depression.   That, of course, doesn’t take away that Anna has the most impressive, encyclopedic knowledge of these events, knowledge that she projects splendidly in the fluency of her speech and in the surprising volume of her voice.

Yesterday evening, the European Union Studies Center organized a lecture by Anna Schwartz on the origins of the ongoing crisis.  I attended, took notes, and then, at the end, during the Q&A period, I kindly objected to one of Anna’s claims.  I expected the lecture to be an elaboration of thoughts she expressed on her well publicized October 18 Wall Street Journal’s interview blaming the Fed (Greenspan) for ushering the financial crisis and criticizing the Fed (Bernanke) for handling it the wrong way — while praising Paulson’s initial TARP.   And that’s exactly what she did in the lecture.

But I’ll share all that tomorrow, when I update this blog post.


1 Comment

  1. I didn’t manage to update this post. I’ll just add here that I objected to Anna’s claim that the GSEs had been largely responsible for the subprime excesses (prompted by Greenspan’s too lax monetary policy). She devoted quite a while to incentive issues, the corrupt political ties linking the GSEs to politicians, etc. A person before me asked her to produce evidence to back up her claim and she admitted that she had none. So it was just her prejudice. I don’t mean to say that there’s no corruption, conflicts of interest, and moral hazard involved with the GSEs, but I thought it was important to contest Anna’s claim that the GSEs drove the subprime boom. So, I said in my Q&A intervention that some empirical economists had actually looked at the facts and exculpated Fannie, Freddie, and the 1974 Community Reinvestment Act. It was private lenders that pushed the subprime boom. Similar findings have been made by San Francisco Fed economists, as reported here:

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