A Different View from the Fed

Thomas Hoenig, President of the Fed of Kansas City, does not accept the "too big to fail" argument when he says, "actions that strive to protect our largest institutions from failure risk prolonging the crisis and increasing its cost. Of particular concern to me is the fact that the financial support provided to firms considered ‘too big to fail’ provides them a competitive advantage over other firms and subsidizes their growth and profit with taxpayer funds.” He believes that we should let capitalism work. Thos banks that are not viable should be closed.

Hoenig has been around long enough to know that "when the recession ends, old habits will reemerge." Thus, we need to start defining the new supervisory era now and we need to look not only at possible future regulations but at past regulations that worked well.