April 17, 2016

FDIC’s Thomas Hoenig is miscast in his current role. Standing up for “The Risky” he would achieve much more

Sir, I refer to: “Corporate person in the news: Thomas Hoenig: A US ‘sentinel on the front lines of the banking system’” April 16.

It states: “In 2010 Hoenig cast eight consecutive dissenting votes against the easy money policies of “quantitative easing”, arguing that they could pave the way for another crisis.”

That to me sounds like a man of character that would do much better if representing the totally unrepresented “risky” bank borrowers; like the SMEs and entrepreneurs.

If he did that, it would be easier for him to understand how absurd it is allowing banks to hold laughingly little capital against some assets, only because these have been perceived, decreed or concocted as safe. Representing The Risky he would be able to argue: “We have never ever caused a major bank crisis. That has been entirely the doings of those ex ante erroneously perceived as safe”

If he did that he would have understood that the strongest argument for banks holding more capital, is the discrimination the little capital required when lending to The Safe causes against The Risky’s access to bank credit.

And had he been able to get rid of the minimalistic capital requirements for the safe assets then, as a big bonus, he would have helped to get rid of the most important growth hormone for the too-big-to-fail banks.

And many, especially the young, would love him. By combating that credit risk aversion so anathema to the Home of the Brave and that is diminishing its economy, he would have helped to restore that risk taking that made America great… and so help create a new generation of jobs.

@PerKurowski ©