Originally published in Sep. 2010, this is Hoenig's best public speech.
Video: Hoenig speaks to a local Kansas City Tea Party group - Sep. 23, 2010
This has not been posted on any economic or finance site.
Part 2 is below and covers Hoenig's view on the economy. Most of those listening want to abolish the Fed, so it's a tough audience. Outstanding piece from Bloomberg on Hoenig's speech. I suggest you read the whole thing.
Thomas M. Hoenig, dressed in a gray suit, white shirt with French cuffs, and blue tie, faces an edgy crowd of 150 people in a hotel meeting room in suburban Lenexa, Kan. A large “Kansas City Tea Party” banner covers a table at the door. Attendees wear anti-tax stickers on their lapels. This is not an after-dinner speech for which most central bankers would volunteer.
Hoenig heads the Federal Reserve Bank of Kansas City. This year he also serves as a voting member of the powerful Federal Open Market Committee in Washington, which controls interest rates and the money supply. Many of those just now finishing their chocolate-chip bread pudding dessert at Lenexa’s Crowne Plaza Hotel would like to see Hoenig lose his job. Nothing personal: They just consider the Federal Reserve an affront to the Constitution and want to shut it down, lock, stock, and vault.
Hoenig smiles at his audience and begins: “This is a support-the-Fed rally, right?”
Then the room erupts in laughter. Disarmed, the Tea Partiers listen politely as Hoenig defends the Federal Reserve as an indispensible institution, even if at the moment, he says, it happens to be heading in the wrong direction.
And, by the way, if it were up to him (though it’s not, really) he would break up the biggest Wall Street banks.
The applause starts tentatively, then builds to respectful appreciation. Afterwards, Steve Shute, a leader of the Hope for America Coalition, the Kansas group that sponsored the dinner, compliments Hoenig for impressing a tough crowd. “We believe the Federal Reserve should be abolished,” he says. It “is helping to destroy the country.” That said, Hoenig seems like an O.K. guy. “He is someone going toe-to-toe with Ben Bernanke and the Boston-New York-Washington-San Francisco elite axis at the Fed. He brought some Midwestern common sense to the Fed,” says Shute. “We know he doesn’t agree with us, but we’re still proud of him.”
This is Tom Hoenig’s moment, and it’s a strange one. In Washington, he is the burr in Fed Chairman Bernanke’s saddle: the rogue heartland banker who keeps dissenting alone -- for the sixth straight time on Sept. 21 -- to protest the Fed’s rock- bottom interest-rate policy. Hoenig warns that the Bernanke majority is setting the country up for an as-yet-unknown asset bubble: the next dot-com or subprime craze. He can’t tell yet where the boom-and-bust will materialize, but he can feel it coming, like a Missouri wheat farmer senses in his bones the storm that’s just over the horizon.
Hoenig’s outlying position seemed less eccentric earlier this year, when the recovery had more zip. “To continue to hold it through the kind of deterioration in the economy we’ve seen the past couple of months is, to me, quite puzzling,” says Lyle Gramley, a Federal Reserve governor in the 1980s who works as a senior economic adviser with Potomac Research Group in Washington. Paul Krugman, the Princeton University Nobel laureate and New York Times columnist, has written that Hoenig and a couple of other Fed presidents from the provinces have intimidated Bernanke out of taking more aggressive steps to stimulate job growth.
“I think that’s nonsense,” Hoenig fires back. His irritation reveals how much he takes the disagreement to heart. Says Richard W. Fisher, president of the Dallas Fed and a Hoenig friend: “I know Tom anguishes over this. He and I have talked about it.”
The hard truth, in his view, is that there just isn’t much more the Fed can do to help, and we all ought to admit that.
While persisting in this lonely campaign for the end to ultra-easy credit, Hoenig has also been a harsh critic of Wall Street excess (an issue on which he and Krugman mostly agree). In abundant speeches and articles, Hoenig has condemned the political influence of the financial elite. “We’ve had a Treasury Secretary from Goldman Sachs under a Democratic President and a Treasury Secretary from Goldman Sachs under a Republican President. The outcomes were not good,” Hoenig says while being driven to a luncheon talk at an affordable housing conference in Topeka, Kan.
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Part 2...
Update: Hoenig is no longer alone against Bernanke
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