Fed Behaving Dangerously, Fed President Says

  • Playlist
  • Download
  • Embed
    <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
Not afraid to say no.

Not afraid to say no. Nati Harnik/AP hide caption

toggle caption Nati Harnik/AP

Every time the Fed's key policy committee met last year, almost everybody in the group agreed on what the Fed should do.

On today's Planet Money, we talk to the one guy who, meeting after meeting, cast the lone "no" vote: Thomas Hoenig, president of the Kansas City Fed.

Hoenig thinks the Fed is repeating mistakes of the past, keeping interest rates too low for too long. That risks creating another bubble — and another crash, he says.

Hoenig says the Fed's decision to lower interest rates in 2003 helped fuel the credit bubble that led to the recession:

...unemployment is high today because we tried to make it lower, faster than we should have in 2003. We should learn from that. ... I want to see pepole back to work. But I want them back to work permanently. I don't want them back to work until the next bubble pops and we have unemployment back up to 11 or 12 percent.

...during that boom period of the decade of the 2000s, America leveraged itself up tremendously. Consumers increased their debt levels from 80 percent of disposable income to 125 percent. Banks increased their leverage ... Then the crash comes, you still have all this debt. That takes time to work off ... and if you try and rush it ... you cause yourself to recreate new bubbles. You're in the long run only going to hurt those very people you're trying to help.

Subscribe to the podcast. Music:The Decemberists' "This Is Why We Fight." Find us: Twitter/ Facebook.



Please keep your community civil. All comments must follow the Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

NPR thanks our sponsors

Become an NPR sponsor

Support comes from