FedUpUSA

Kansas City Federal Reserve President Hoenig: So Close And Yet So Far

 

Well well look what spewed from this guy’s mouth:

Federal Reserve Bank of Kansas City President Thomas Hoenig said banks’ business should be confined to loans and deposits to avert a recurrence of the federal bailouts and near-collapse of the financial system in 2008.

Add one more thing and you’re there Thomas: One dollar of capital.

That is, a bank can only loan against something that actually exists.  It can loan against collateral value (marked to the market in each and every case) or it can loan against capital it either owns (e.g. retained earnings) or has borrowed (e.g. from bondholders.)

Do that and “Too Big to Fail” instantly disappears.  So does systemic risk.  Business risk and the possibility of going bankrupt does not, of course, nor should it.

One simple change Thomas, and we have a safe and sound banking system.

It’s not that tough.

The Market-Ticker

Share

Comments

comments