Hoenig gets to vote on Fed policy. Good to know there's some dissent from within.
Let Insolvent Financial Firms Fail: Fed's Hoenighttp://www.cnbc.com/id/30324929">CNBC
Insolvent financial firms must be allowed to fail regardless of their size, and sheltering such "too big to fail" institutions risks making the financial crisis worse, a top Federal Reserve official said Tuesday.
In blunt criticism of the government and his fellow central bankers, Federal Reserve Bank of Kansas City President Thomas Hoenig also said that the design of a $700 billion bank bailout last year had created uncertainty and slowed recovery.
"The United States currently faces economic turmoil related directly to a loss of confidence in our largest financial institutions because policymakers accepted the idea that some firms are just 'too big to fail.' I do not," Hoenig told the Joint Economic Committee of the Congress in prepared remarks.
"Yes, these institutions are systemically important, but we all know that in a market system, insolvent firms must be allowed to fail regardless of their size, market position or the complexity of operations," said Hoenig, who will be a voter on the Fed's policy-setting committee next year.
The biggest 19 U.S. banks are being subjected to a battery of so-called stress tests to restore confidence in their soundness, with guidelines on the process due on Friday and the results on May 4.