So now the Dallas Fed chief has weighed in, calling for the break-up of banks that are – you guessed it, “too big to fail”.
But as Baseline Scenario notes on Wednesday, it is the hawkish Thomas Hoenig, president of the Kansas City Fed, who up to now has been either celebrated or feared as the main Fed force calling for a tougher stance on rescued banks and a break-up of those considered too big to fail.
This, Baseline’s James Kwak notes, has “been a bit unfair” to Richard Fisher, president of the Dallas Fed, who it says has been equally outspoken on the TBTF issue.
Indeed, Fisher this week appeared to go even further than Koenig on the issue of bank break-ups, calling, as the FT reports on Thursday, in a Wednesday speech (ominously entitled “Lessons Learned, Convictions Confirmed”) for the break-up of large institutions – both in the US and abroad – even before they become “too big to fail”. (See the full speech here.)
Hoenig, meanwhile, aptly described by ReformedBroker as “America’s next top Fed hawk”, is on a one-man mission to spur the Fed into raising interest rates, launching full-frontal calls this week for rate rises and warning about the risky nature of an extended period of ultra-low rates.
Hoenig, to remind, was the lone dissenter in January at the Fed’s FOMC January policy meeting to object to language indicating that interest rates should remain near zero for an “extended period”.
In a February speech at the Pew-Peterson Commission on Budget Reform he also, as the FT reported, warned against the “dire” consequences of the Fed prolonging its holdings of mortgage-backed securities, purchased last year in a drive to prop up the US housing market.
On Tuesday he told CNBC:
“We know that zero is non-sustainable … the market already knows that”.
And in his earlier speech, he usefully warned that being pulled into political issues has complicated the Fed’s job, which, he said, should remain focused on the Fed funds rate and price stability.
Are you listening, Ben?
Related links:
Obama sends Volcker rule to Congress - FT
The importance of Donald Kohn – BaselineScenario
Fed’s Hoenig says higher rates won’t derail the economy - WSJ
In-depth: Obama and Wall Street – FT.com
Fed grapples with policy brakes – FT