Wednesday, September 03, 2008

Fed President Hoenig Says Financial Institutions Must be Allowed to Fail

From Bloomberg:
Federal Reserve Bank of Kansas City President Thomas Hoenig said for economies to work best, institutions must be allowed to 'fail.'

Economies must "find a balance between financial stability and a stable price environment and in doing so must be able to allow individual institutions to fail," Hoenig said in a speech today in Buenos Aires. ...

"Financial crises will occur despite our best efforts to prevent them," Hoenig said in prepared remarks at an event hosted by Argentina's central bank. "The 'Too Big to Fail' issue will only grow in importance as the consolidation of the financial industry grows in both size and scope in future decades." ...

Hoenig, 61, dissented from a rate cut on Oct. 31 because of inflation concerns. Hoenig doesn't vote this year and will vote next in 2010. Dallas Fed President Richard Fisher has dissented from Federal Open Market Committee votes five times this year, preferring to raise interest rates last month.

7 comments:

  1. The world economic's is unstable right now.

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  2. SPECTRE of DeflationSeptember 03, 2008 11:03 AM

    "Financial crises will occur despite our best efforts to prevent them," Hoenig said in prepared remarks at an event hosted by Argentina's central bank."

    In spite of their best efforts? They are the consumate bubble blowers. How they [The FED] can keep a straight face while talking is beyond me, but then I don't lie with every breath.

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  3. a real vote of dissent would be to resign and verbally trash command/centralized economies.

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  4. guy n. cognito said...
    "a real vote of dissent would be to resign..."

    Resigning is just a way to throw a temper tantrum. It is counterproductive. If everyone who dissents resigns, then all you will get at the Fed is people who don't dissent.

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  5. James' quote-

    "If everyone who dissents resigns, then all you will get at the Fed is people who don't dissent."

    There wasn't much dissent all of the years that Greenspan was at the helm of the Fed and everything looked fine. Now that the wheels are coming off the wagon those who want so save themselves from the lynch mob (or from the class action lawsuits from angry investors) are talking up how they disagreed with the Fed's actions. Its better for Hoeing to throw Greenspan and Bernake under the bus than get run over himself.

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  6. That's not correct. Actually, as Fed Chairman, Alan Greenspan encouraged unanimity in public, even if there was dissent in private. Bernanke, on the other hand, encourages public dissent. That's the reason for the difference. I think Bernanke's approach is better.

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  7. Here’s one for Lance…..

    During the boom, option ARMs were often the only way that borrowers could buy wildly appreciating real estate. Indeed, lenders actually approved these loans based only on whether borrowers could afford to make the minimum payments.

    http://tinyurl.com/5ktd2p

    ReplyDelete