Economist Edward Gramlich, a longtime University professor and administrator, died of leukemia yesterday morning in a Washington, D.C. hospice. He was 68.

In a career at the University that spanned four decades, Gramlich helped create the Ford School of Public Policy and served as its first dean. After a stint as a governor of the Federal Reserve Board, he returned to the University to serve as interim provost from 2005 to 2006.

Colleagues said Gramlich's role in the expansion of the Institute of Public Policy Studies into a full-fledged School of Public Policy was integral.

"We wouldn't have made it without Ned," said Public Policy Prof. John Chamberlin, who was friends with Gramlich. "The University does not create schools often. That is a sign of his leadership."

Gramlich predicted the problems caused by sub-prime lending long before the issue began to draw headlines. During his time at the Federal Reserve, he called for increased regulation of the housing loan industry. But policymakers didn't heed his warnings.

"If the Fed had gone his way a couple of years ago, things would be very different today," said Public Policy Prof. Paul Courant, who preceded Gramlich as provost.

That sort of foresight is exactly what Gramlich's colleagues had come to expect.

"Ned had a talent for getting to interesting problems first," said Courant, who played weekly tennis matches with Gramlich when the two were starting out as University professors in the late 1970s and 1980s.

"Ned was one of the great public economists," Courant said. "Whatever the problem was, he would figure out a way to work around it."

As interim provost, Gramlich guided the University through a time of tight budgets. Between 2003 and 2006, the state cut University funding by 13.6 percent.

"He understood better than most the difficult transition Michigan would have to make as its state funding continued to decline," said former University President James Duderstadt in an e-mail interview.

Friends said Gramlich was amazingly efficient, completing work as soon as it came across his desk.

"He had the cleanest desk I've ever seen," Chamberlin said.

Gramlich first came to the University in 1976 as a professor of economics and public policy.

Courant, who served on the search committee that selected Gramlich as a professor, said he was selected for his wide range of experience in economics and public policy.

Gramlich quickly became a student favorite as well as a target of good-natured ribbing.

Students often mimicked Gramlich in annual skits and dressed as him for Halloween, said School of Information Prof. Jeffrey MacKie-Mason, who was Gramlich's student in the early 1980s.

Gramlich took the teasing in stride, even encouraging an underground satirical newspaper at the Institute of Public Policy Studies in which he was regularly featured as a power-mad dictator-like character.

But that was "just the opposite of reality," MacKie-Mason said.

Chamberlin said Gramlich had a reputation for fiercely throwing his tall, lanky frame into the annual student-faculty games of basketball and flag football.

MacKie-Mason credits Gramlich for inspiring him to become a professor. He said that as a teacher Gramlich was clear and compassionate but challenging.

MacKie-Mason stayed in touch with Gramlich until his death.

University President Mary Sue Coleman released a statement yesterday afternoon calling Gramlich an "exceptional economist, a solid administrator and a dedicated Michigan faculty member. He also was a kind and gentle man known for his humility and humor."

Gramlich was diagnosed with acute myeloid leukemia in March after becoming ill during a trip to Africa. Last month, Gramlich and his family made the decision to stop treatment for the disease.

Gramlich had battled leukemia before.

In 2002, Gramlich was diagnosed with acute lymphocytic leukemia, a more treatable form of the disease. After completing treatment, the leukemia went into remission.

Gramlich graduated from Williams College in 1961 and went on to receive his master's and doctorate in economics from William and Yale University respectively, before joining the Federal Reserve as a research economist.

In addition to his wife, Ruth, and two children, Gramlich is survived by his parents, two brothers and one sister and six grandchildren.