Fed Dissenter Thomas Hoenig Retires

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Thomas Hoenig, the president of the Federal Reserve Bank of Kansas City, retires this week. He sticks out among members of the Open Markets Committee. He's voted against low interest rate policy years, and he's spoken against it, though in a decorous way. With just a couple of days left on the job, he's speaking more forcefully now.


For years, the Federal Reserve has worked to keep interest rates low. But one member of the Fed's Open Market Committee has been critical of keeping rates near zero for so long.

Thomas Hoenig is president of the Kansas City Federal Reserve Bank, at least for a few more days. He's retiring and that means he's speaking even more freely than usual.

Hoenig made his last public address as bank president today and Frank Morris of member station KCUR was there.

FRANK MORRIS, BYLINE: Hoenig turns 65 this week, the mandatory retirement age for Fed bank presidents. So, when Peter deSilva, the CEO of a regional bank in Kansas City, introduced Hoenig at a chamber breakfast this morning, it was sort of Fed bank president unplugged.

PETER DESILVA: I'm told that Tom has no prepared remarks this morning, but rather wants to speak with us honestly, forthrightly and from the cuff. Seems like a regular speech to me.

MORRIS: Candor is fairly standard for Hoenig. A couple of years ago, he wrote a paper called "Too Big Has Failed," a critique of propping up big banks. He's also bucked the Fed's easy money, low interest rate policy for years. He says keeping interest rates artificially low has actually enabled the real problem.

THOMAS HOENIG: In a world of instant gratification, we have had two decades in this country of consuming more than we produce by a considerable margin.

MORRIS: No country can do that forever, he says. Even though the Fed keeps trying to goose the economy with cheap money, the economy can no longer jump.

HOENIG: So that's why I have systematically opposed the use of money as a mechanism to solve all of our problems. You cannot tell me a business, a commodity, a service that trades well at the price of zero and allocates resources as well at the price of zero. Why would it do so with interest rates? It won't.

MORRIS: Meantime, he says Washington has become addicted to low interest rates, which Hoenig says has given lawmakers cover to paper over serious long term problems with short term fixes.

HOENIG: People say, and I understand it completely, we need to add jobs. We need to add jobs, but the problem is you don't just add jobs. You produce things, you make things and from that, jobs come.

MORRIS: Hoenig says leaders need an attitude adjustment to think long term, to get serious about, among other things, the deficit. He thinks they should pass a broad package of spending cuts and tax hikes like the ones the Simpson-Bowles Commission outlined last year.

Now, Hoenig's ideas haven't always gone over that well in Washington, but in Kansas City, the business class sent him out with a long, standing ovation.


MORRIS: Frank Lenk is an economist here.

FRANK LENK: He put a Kansas City voice in the thick of national policymaking, took that conservative Midwestern ethic to Washington or to the Fed and provided a perspective that others didn't.

MORRIS: Lenk says Hoenig's perspective has started to grab a little more traction lately with two other open market committee members joining the dissent. And Lenk says that Kansas City voice will likely ring after Hoenig's last day on the job.

Another Midwesterner, Esther George, takes over as president of the Fed bank here Saturday.

For NPR News, I'm Frank Morris in Kansas City.

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