Thomas Hoenig
Federal Reserve President Thomas Hoenig breaks ranks and sounds like Dylan Ratigan, Gerald Celente, Ron Paul or Murray Rothbard.
Mr. Hoenig has always been a bit of a renegade, yet his recent speech reaches into areas where he (and no other Fed official in my memory) has dared to tread. He is correct of course.
It is difficult to believe that he didn’t know or suspect all of this for at least two years, if not longer. The question then is why come out now? Surely he could have spoken out a year ago. Is his timing irrelevant or is it meaningful?
Hoenig’s words must be pleasing to Ron Paul as he gears up his offensive against the Fed and the banking system. Chairman Ben Bernanke, beginning to absorb shots from all sides, is extremely vulnerable as is the institution he commands. To Mr. Bernanke, Hoenig must appear to be a monetary Benedict Arnold.
There is no clear interpretation as to why Hoenig spoke out at this time. My thoughts, which are purely speculative, are that he knows how desperate the situation has become, at least in part due to Fed policies. Mr. Bernanke appears to have boxed himself in and is unwilling to admit error regardless of sound counter arguments or uncooperative empirics. The Chairman acts as if he is the captain of the Titanic and immune to icebergs.
In such a situation, it is easy to imagine a man, after doing all he could, resigning himself to an inevitable outcome. Once that recognition develops, one must either leave the ship or somehow or another displace the captain or his policies. Hoenig has figuratively left the ship by divorcing himself from current Fed policy and (perhaps) the possibility of the Fed as a workable institution.
Many will consider Hoenig’s behavior as CYA behavior. Others will liken him to a rat leaving a sinking ship. Regardless, he has sounded a warning to the rest of us that seems to be motivated by his judgment that our current policies are hopeless. For that, he should be considered a hero. It would have been so more convenient and comfortable for him to merely “retire so that I can spend more time with my family” without sounding his alarm.
Federal Reserve president says, break up the banks
Thomas Hoenig, President Federal Reserve of Kansas City, in an extraordinary speech says the big banks must be broken up and essentially implies the system itself is broken and corrupt. While this is something any reader of this blog probably agrees with, having it come from a Fed president indicates a palace revolt is brewing.
There are many villains in the story of the recent crisis and much written to name them, describe them and even curse them. If you want to know how it happened, read “Thirteen Bankers” and “All the Devils Are Here.” If you want to know how to fix the problem, I highly recommend “Regulating Wall Street,” from New York University’s Stern School of Business. If you want to understand why the American public refuses to ignore the injustices associated with executive compensation in bailed out companies versus budget cuts borne by the middle class, read Rolling Stone’s article “Why isn’t Wall Street in Jail?” If you wonder why “no one saw it coming” then I suggest you read up on Brooksley Born or, a decade later, Meredith Whitney.
Today, I am convinced that the existence of too big to fail financial institutions poses the greatest risk to the U.S. economy. The incentives for risk-taking have not changed post-crisis and the regulatory factors that helped create the crisis remain in place. We must make the largest institutions more manageable, more competitive, and more accountable. We must break up the largest banks
Market Ticker has lots more and Zero Hedge says The Fed mutiny has arrived. Good. It’s been a long time coming.
We need to take back the country from the criminals who are stealing it from us.
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