KC FED RESERVE PREZ: OBAMA'S FINANCIAL BILL SUCKS

WELL, THOSE ARE MY WORDS - BUT HIS SENTIMENTS IN A GOOD OP-ED IN THE NYTIMES! EXCERPT:

[OBAMA'S AND THE DEMOCRATS PLAN] undermines the very foundation of our economic system when the government decides that a financial institution is too big or too powerful to fail.

The big banks and investment companies hold a significant advantage in the competition for funds (for example, from depositors and bond holders), because creditors know that they will be bailed out when a crisis occurs.

This advantage has systematically undermined the competitive position of every smaller bank, and has enabled the largest banking organizations to more than double their share of industry assets since the 1990s.

These trends serve neither the national economy nor communities like Santa Fe.

And in the end, they are a burden on taxpayers.

Unfortunately, the proposal for regulatory reform now before the Senate does not eliminate the concept of too-big-to-fail, and it deliberately narrows the central bank’s focus to Wall Street alone.

... The flawed logic of this proposed change is that only the biggest firms are systemically important; that only they require the contingency lending that the Fed provides at its discount window; that only they will be involved in future crises; and that overseeing these firms is sufficient to provide the “macro-prudential supervision” the central bank’s charter requires. By this reasoning, the 6,700 other banks and the communities they serve are of no immediate consequence to the mission of the Federal Reserve. Who outside of Wall Street can legitimately support such thinking?

... Because the Federal Reserve supervises banks and bank holding companies of all sizes, it is able to address regional as well as national banking problems when they erupt. In addition, I and other Fed presidents can take information about regional financial and economic conditions into monetary policy discussions.

Without the Fed seeing the view from every corner of America, without every bank knowing it will be treated the same, the Federal Reserve cannot do its job and direct the same attention to the smallest firms as the largest. It cannot serve Main Street.

Thomas Hoenig is the president of the Federal Reserve Bank of Kansas City.

RTWT.