The passing of an under recognized giant.

All too often it is the woman in a relationship that gets shortchanged when recognition for success is dispensed.

 

So it was with the collaboration between economists Anna Schwartz and Nobel laureate Milton Friedman.

 

Anna J. Schwartz, a research economist who wrote monumental works on US financial history in collaboration with Nobel laureate Milton Friedman while remaining largely in his shadow, died Thursday at her home in New York City. She was 96.

 

Dr. Schwartz earned her undergraduate degree from Barnard College at 18, and earned her doctorate in economics at age 48.

 

The Friedman-Schwartz collaboration — ‘‘A Monetary History of the United States, 1867-1960,’’ a book of nearly 900 pages published in 1963 — is considered a classic. Ben S. Bernanke, chairman of the Federal Reserve, called it ‘‘the leading and most persuasive explanation of the worst economic ­disaster in American history.’’  Ironic praise from Bernanke considering Schwartz’s criticism of the Fed’s handling of the 2008 financial crisis.

 

The authors concluded that policy failures by the Fed, which largely controls the money supply, were one of the root causes of the Depression.

 

Bernanke acknowledged as much when he spoke at a 90th birthday celebration for Friedman in 2002.

 

‘‘I would like to say to Milton and Anna: Regarding the Great Depression, you’re right; we did it,’’ he said. ‘‘We’re very sorry, but thanks to you we won’t do it again.’’  Hmmmm.

 

Dr. Schwartz was widely known in the profession as the coauthor of much of the work that led to Friedman’s Nobel in economic science in 1976. Her supporters thought the prize might justly have been awarded jointly.

 

‘‘Anna did all of the work, and I got most of the recognition,’’ Friedman said on one occasion.

 

During the financial collapse that began in 2008, she was one of the few surviving economists with a firsthand recollection of the Depression. After praising early moves by Bernanke, she wrote, at age 93, a bitingly critical Op-Ed article for The New York Times in July 2009 opposing the reappointment of the Fed chairman who had been so influenced by her work.

 

She contended that Bernanke had erred in producing ‘‘extreme ease’’ in monetary policy and in failing to warn investors that new financial instruments were difficult to price.

 

Dr. Schwartz also held that the government had been a bigger contributor to the crisis than had been widely realized. By her measure, the government had oversold the benefits of homeownership, pushing Fannie Mae and Freddie Mac, the government-backed mortgage finance giants, to lend increas­ingly to lower-income borrowers and fostering exceptionally low mortgage rates.

 

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“Firms that made wrong decisions should fail.  You shouldn’t rescue them.  And once that’s established as a principle, I think the market recognizes that it makes sense.  Everything works much better when wrong decisions are punished and good decisions make you rich.  That’s not the way the world has been going in recent years.”

~ 2009, Anna Schwartz, Economist, 1915-2012

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“The Fed has gone about as if the problem is a shortage of liquidity.  That is not the basic problem.  The basic problem is uncertainty that the balance sheets of financial firms are credible.”

~ 2009, Anna Schwartz, Economist, 1915-2012

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John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury