Fed's Hoenig Advocates Breaking Up TBTF...

[GRG55]

...and other heresies...:eek:

I am surprised this hasn't received any attention yet :confused:

The Federal Reserve FOMC wasn't scheduled to meet again until April 27/28, but has called an unscheduled meeting for Monday, April 5.
Maybe they feel an urgent need to explain to Thomas Hoenig that he's not in Kansas any more...:rolleyes:

From the HuffPost:

Top Fed Official Wants To Break Up Megabanks, Stop The Fed From Guaranteeing Wall Street's Profits

The U.S. should bust up its megabanks and impose strict laws curbing the size and complexity of financial institutions, a top Federal Reserve official told the Huffington Post.

In a 45-minute interview this week, Federal Reserve Bank of Kansas City President Thomas M. Hoenig, who's emerged as one of the few influential voices calling for a fundamental redesign of a broken U.S. financial system:

• Lambasted the tilted playing field that benefits Wall Street banks over Main Street banks;
• Called the idea that the U.S. needs megabanks to compete globally a "fantasy";
  
• Said Congress should mandate simple, easily understood and enforceable rules -- rather than guidelines -- so regulators can restrain financial firms and rein in the financial system;
  
• Prodded the Senate to get tougher on permanently ending Too Big To Fail by enacting laws that would take away much of the discretion currently held by policymakers (who bailed out financial firms when confronted with these decisions in late 2008);
  
• And criticized the Federal Reserve's ongoing policy to keep the main interest rate near zero because it "guarantee[s] a spread to Wall Street", enabling unearned profits and "encourag[ing] speculation."...

[GRG55]

Re: Fed's Hoenig Advocates Breaking Up TBTF...

...and other heresies...:eek:

I am surprised this hasn't received any attention yet :confused:

The Federal Reserve FOMC wasn't scheduled to meet again until April 27/28, but has called an unscheduled meeting for Monday, April 5.
Maybe they feel an urgent need to explain to Thomas Hoenig that he's not in Kansas any more...:rolleyes:

From the HuffPost:

Top Fed Official Wants To Break Up Megabanks, Stop The Fed From Guaranteeing Wall Street's Profits

The U.S. should bust up its megabanks and impose strict laws curbing the size and complexity of financial institutions, a top Federal Reserve official told the Huffington Post.


In a 45-minute interview this week, Federal Reserve Bank of Kansas City President Thomas M. Hoenig, who's emerged as one of the few influential voices calling for a fundamental redesign of a broken U.S. financial system:

• Lambasted the tilted playing field that benefits Wall Street banks over Main Street banks;
• Called the idea that the U.S. needs megabanks to compete globally a "fantasy";
  
• Said Congress should mandate simple, easily understood and enforceable rules -- rather than guidelines -- so regulators can restrain financial firms and rein in the financial system;
  
• Prodded the Senate to get tougher on permanently ending Too Big To Fail by enacting laws that would take away much of the discretion currently held by policymakers (who bailed out financial firms when confronted with these decisions in late 2008);
  
• And criticized the Federal Reserve's ongoing policy to keep the main interest rate near zero because it "guarantee[s] a spread to Wall Street", enabling unearned profits and "encourag[ing] speculation."...

And Simon Johnson weighs in on Jamie Dimon's advocacy to do exactly the opposite:

The Most Dangerous Man in America: Jamie Dimon

By Simon Johnson

There are two kinds of bankers to fear. The first is incompetent and runs a big bank. This includes such people as Chuck Prince (formerly of Citigroup) and Ken Lewis (Bank of America). These people run their banks onto the rocks – and end up costing the taxpayer a great deal of money. But, on the other hand, you can see them coming and, if we ever get the politics of bank regulation straightened out again, work hard to contain the problems they present.

The second type of banker is much more dangerous. This person understands how to control risk within a massive organization, manage political relationships across the political spectrum, and generate the right kind of public relations. When all is said and done, this banker runs a big bank and – here’s the danger – makes it even bigger.

Jamie Dimon is by far the most dangerous American banker of this or any other recent generation...

...Dimon fully understands – although he can’t concede in public – the private advantages (i.e., to him and his colleagues) of a big bank getting bigger. Being too big to fail – and having cheaper access to funding as a result – may seem unfair, unreasonable, and dangerous to you and me.

But to Jamie Dimon, it’s a business model – and he is only doing his job, which is to make money for his shareholders (and for himself and his colleagues).

Dimon represents the heavy political firepower and intellectual heft of the banking system. He runs some of the most effective – and tough – lobbyists on Capitol Hill. He has the very best relationships with Treasury and the White House. And he is determined to scale up...

[jk]

Re: Fed's Hoenig Advocates Breaking Up TBTF...

the fed's probably meeting to figure out how to resist the latest freedom of info orders. there must be some genteel way to make clear that they are not only outside the 3 branches which are delineated in the constitution, they are ABOVE the 3 branches, since the banks which the fed represent [surely not regulate] own the 3 branches. how do they put the help in their place without being too obvious about it?

[Serge_Tomiko]

Re: Fed's Hoenig Advocates Breaking Up TBTF...

He is part of the system. At best, he realizes revolution is coming, and with it, justice. At worst, he is a shill making a last ditch effort to dupe the American people.

If he truly wishes to achieve redemption, I highly suggest he breaks with this banking cabal and starts naming names.

[Starving Steve]

Re: Fed's Hoenig Advocates Breaking Up TBTF...

It should be apparent to everyone by now that re-appointing Bernanke to the FOMC was a huge mistake. His policies: the ZIRP, TBTF, and the TARP have been a disaster. The guy is clueless because he doesn't understand inflation and bubble economics. Instead of studying the 1930s in America, he should have studied inflation in Latin America, 1945-1990.

Absolutely, the ZIRP guarantees Wall Street profits. And those easy profits mean bubble-economics. That means TBTF, not economic recovery. And that means more TARP ahead when the bubbles burst.

Would you want to invest in America with Bernanke running the Fed? Not me.:rolleyes:

[GRG55]

Re: Fed's Hoenig Advocates Breaking Up TBTF...

Another reason to break up TBTF - and separate deposit banking from investment banking?

From the WSJ:

Big Banks Mask Risk Levels

Quarter-End Loan Figures Sit 42% Below Peak, Then Rise as New Period Progresses; SEC Review

APRIL 9, 2010

Major banks have masked their risk levels in the past five quarters by temporarily lowering their debt just before reporting it to the public, according to data from the Federal Reserve Bank of New York.

A group of 18 banks—which includes Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. and Citigroup Inc.—understated the debt levels used to fund securities trades by lowering them an average of 42% at the end of each of the past five quarterly periods, the data show. The banks, which publicly release debt data each quarter, then boosted the debt levels in the middle of successive quarters...

[jk]

Re: Fed's Hoenig Advocates Breaking Up TBTF...

Another reason to break up TBTF - and separate deposit banking from investment banking?

From the WSJ:

Big Banks Mask Risk Levels

Quarter-End Loan Figures Sit 42% Below Peak, Then Rise as New Period Progresses; SEC Review

APRIL 9, 2010

Major banks have masked their risk levels in the past five quarters by temporarily lowering their debt just before reporting it to the public, according to data from the Federal Reserve Bank of New York.

A group of 18 banks—which includes Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. and Citigroup Inc.—understated the debt levels used to fund securities trades by lowering them an average of 42% at the end of each of the past five quarterly periods, the data show. The banks, which publicly release debt data each quarter, then boosted the debt levels in the middle of successive quarters...

i used to think i was cynical. but i've now come to assume that all official and corporate data is manipulated and deceptive.

[bobola]

Re: Fed's Hoenig Advocates Breaking Up TBTF...

jk,

Watch the free online documentary called The Corporation.

It makes the case that corporations and psychotics share the same characteristics.

[Thailandnotes]

Re: Fed's Hoenig Advocates Breaking Up TBTF...

i used to think i was cynical. but i've now come to assume that all official and corporate data is manipulated and deceptive.

"No matter how cynical you become, it's never enough to keep up."

Lily Tomlin