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Option1307 (29.75)

Thomas Hoenig, a glimmer of sanity within the Federal Reserve...?

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September 13, 2009 – Comments (0) | RELATED TICKERS: F , ED

I came across an interesting article this morning that has given me a slight glimmer of hope, maybe everyone at the FED is not completely incompetent and self-serving. Well, they most likely are still but this article nonetheess had some interesting points...

--> In June Hoenig stirred up controversy when he accused the federal government of "regulatory malpractice" by creating another regulatory regime without addressing "too big to fail." He warned of an "oligarchy of interest that will fail to serve the best interests of business, the consumer and the U.S. economy." 

--> For months the Kansas City Fed chief has called for policymakers to create a plan to break up the most insolvent of these institutions, putting them first into receivership. "If we hesitate to make needed changes," he says, "we will perpetuate an oligarchy of interest."

--> The concentration of power among a few mega-banks troubles Hoenig. "I've seen banks close for making mistakes," says Hoenig. "I've seen other banks too big for the regulators, being supported by the U.S. taxpayer. It's harmful to the infrastructure, and sends the wrong message, that influence is what really matters. If we fail to address 'too big to-fail,' it will only get worse."

I recommend reading the entire article here: http://online.barrons.com/article/SB125271768860105425.html

 

Thomas Hoenig is the long serving member of the Fed, he is the current president of the Federal Reserve of Kansas City, MO. I honestly do not know much about this guy, and it is very possible that he is simply taking part of a PR stunt here. I have no idea. Hopefully he truely believes waht he is saying here. It would be a much welcomed break from the insanity and arguably ciminal actions that have been taking place at the FED. While I don't agree with everything he presents in the article, I appreciate the fact that someone is discussing the "too big to fail" banks. I was completely against the bailouts, but now that they have happened, havn't we just created another huge potential problem. What if one if these uber/giant banks "fail". Then what FED? Do we bail them out again, oh sorry that was a silly question, of course you will...

However, by breaking up these giant (morally repulsive) banks, doesn't that reduce the risk of systematic collapse? I would think so, and thus I am totally in favor of that.

Thomas Hoenig has written several other interesting articles lately, here is another here that is along the same lines: http://www.kc.frb.org/speechbio/hoenigPDF/Omaha.03.06.09.pdf

 

Maybe there is someone with a few brain cells and perhaps a side of ethics left in the crazy world of the FED, I'm not holding my breath, but we can dream right?

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