Fed”s Hoenig: "Too Big Has Failed"

This is important dissension in the reserve system ranks. Here is Kansas City Fed President Thomas Hoenig explaining why current bank policy has failed, and why we’re already nationalizing banks, but doing it wrongly.

We have been slow to face up to the fundamental problems in our financial system and reluctant to take decisive action with respect to failing institutions. … We have been quick to provide liquidity and public capital, but we have not defined a consistent plan and not addressed the basic shortcomings and, in some cases, the insolvent position of these institutions.

We understandably would prefer not to "nationalize" these businesses, but in reacting as we are, we nevertheless are drifting into a situation where institutions are being nationalized piecemeal with no resolution of the crisis.

Read the whole thing. It is highly recommended.

[KC Fed via CR]