Institutions must be allowed to fail
Some common sense from Federal Reserve Bank of Kansas City President Thomas Hoenig. Talking about economic calamity and the economy’s ability to recover Hoenig said allowing institutions to collapse is an important part of the process. It’s nice to hear some common sense once in a while. Take the time to celebrate it.
From Bloomberg:
Economies must “find a balance between financial stability and a stable price environment and in doing so must be able to allow individual institutions to fail,” Hoenig said in a speech today in Buenos Aires.
Turmoil in financial markets has persisted, even after the Fed started and expanded emergency programs to lend to commercial and investment banks. Changes in financial markets combined with the subprime-mortgage crisis have “raised anew questions about the role of central banks in maintaining financial stability,” he said.
“Financial crises will occur despite our best efforts to prevent them,” Hoenig said in prepared remarks at an event hosted by Argentina’s central bank. “The `Too Big to Fail’ issue will only grow in importance as the consolidation of the financial industry grows in both size and scope in future decades.”
Credit:
Institutions must be allowed to fail
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