“Beginning to break them, to dismember them, is a fair thing to consider.”
-Federal Reserve Bank of Kansas City President Thomas Hoenig.

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One of the few people associated with the Federal Reserve who a) actually seems to understand the problems and 2) does not seem to be captured by the banks is Kansas City Federal Reserve Bank President Thomas Hoenig.

At a meeting of the American Economics Association, Hoenig made statements calling for:

1. Maintaining a break up of TBTF as an option;

2. Defining and regulating banks with $50 billion or more in assets more aggressively than smaller banks;

3. Recognizing that when it comes to banks, “size matters;

4. Develop new rules to shut down failing firms in an orderly way;


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Previously:
Hoenig: Let Big U.S. Banks Fail (August 20th, 2009)
http://www.ritholtz.com/blog/2009/08/hoenig-let-big-us-banks-fail/

KC Fed Pres Hoenig on “Negotiated Conservatorship” (April 22nd, 2009)
http://www.ritholtz.com/blog/2009/04/kc-fed-pres-hoenig-on-negotiated-conservatorship/

Source:
Fed’s Hoenig Warns on Too-Big-to-Fail, Backs Glass-Steagall
Luca Di Leo
Real Time Economics, January 5, 2010
http://blogs.wsj.com/economics/2010/01/05/feds-hoenig-warns-on-too-big-to-fail-backs-glass-steagall/

Category: Bailouts, Federal Reserve

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

9 Responses to “Hoenig: Reinstate Glass-Steagall”

  1. ab initio says:

    Maybe Hoening is not “captured” – but talk is cheap until there are actions.

    At least some taxpayers are beginning to stand their ground and there is a President that actually listens to the voters.

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aujWzg8.dcs4&pos=6

    But… here in the USA the bastion of crony capitalism

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aOU4QAVClHXI&pos=3

  2. Steve Barry says:

    Split them up and regulate the consumer banks as utilities…they get a guaranteed rate of return, like the old Ma Bell when it was regulated. We needed deregulation of telecommunications to foster innovation…that led to the Internet, cell phones, wi-fi, etc. We have discovered, as Volcker said, the only beneficial financial innovation we have seen in 25 years was the ATM…all the other “innovation” was disastrous. So regulates consumer banks.

    On the other hand, investment banks should be regulated to a lesser degree in that they can take risks and reap the rewards…but they also can be allowed to fail. Then let’s pray that capitalism works right and if someone gets to be too big, a competitor comes in to balance things out…the Schumpeterian way

  3. call me ahab says:

    what Steve Barry said

  4. cognos says:

    Some old guy on Kudlow yesterday pointed out… this reverence for Glass-Steagall is a least somewhat misplaced.

    Bear and Lehman were not “combinations of commercial and investment banks”. Nothing pre-Glass Stegall would’ve really prevented the bulk of the speculation in housing.

    Some simple counter-cyclical regulation asking for greater down payments (esp for exotic mortgages). That would’ve worked like a charm.

  5. davefromcarolina says:

    Obama may be “listening to voters” but he sure doesn’t seem to do it in the same way he listens to Tim Geithner.

  6. jim2445 says:

    A possible reason that he is not captured by the Banks is that he is in Kansas City, perhaps the only place in America that has a university (University of Missouri/Kansas City) that actually teaches economics.

  7. Kort says:

    Volcker doesn’t agree with reinstatement:

    http://www.businessweek.com/magazine/content/10_02/b4162011026995_page_2.htm

    No. That’s a false statement people make about my position. Glass-Steagall basically said banks cannot underwrite corporate securities or deal with corporate securities. But I would let commercial banks do underwriting of corporate customers. So you could argue that what I propose is somewhat in the spirit of Glass-Steagall in making a distinction between capital-market activities and trading activities and banking activities. But it is not specifically going back to Glass-Steagall.