A Federal Reserve Regional Bank chief tells Congress to allow the broken banks to fail. It would have been nice to have had the powers that be in the Federal Reserve speaking this logic six months ago.
Regional Fed chief Hoenig: Let insolvent banks fail
Denver Business Journal - by Renée McGaw
Bailing out insolvent financial institutions is prolonging the recession and increasing its cost, Kansas City Federal Reserve Bank President Tom Hoenig told members of Congress Tuesday.
Insolvent institutions should be allowed to fail, he said.
Hoenig, the head of a Fed district that includes Colorado, has emerged as a blunt critic of the federal government’s $700 billion bank bailout plan. He was summoned to testify at a hearing of the congressional Joint Economic Committee, a rare invitation for a leader of one of the Fed’s 12 regional banks.
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He went on to say that maybe we shouldn't let some special banks fail. Who determines if a bank is important enough to get "triage" and if that bank is insolvent then why shouldn't their bond holders and stock holders be wiped out?
He recommended that the government “triage” systemically important financial institutions.
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