Federal Deposit Insurance Corp. nominee Thomas Hoenig told lawmakers that large financial firms must be accountable for their own capital and risk-taking and shouldn’t count on government help in the event of a collapse.
“I am not against big, I’m against too-big-to-fail,” Hoenig said today at a Senate Banking Committee hearing on his nomination to serve as FDIC vice chairman. “These institutions should understand themselves and their risk capital. The burden is on them. I don’t support future bailouts.”
Hoenig, who started his career at the Federal Reserve Bank of Kansas City as an analyst 38 years ago and stepped down last month as president, said his experience in regulation and supervision would serve him well in the FDIC’s No. 2 role. President Barack Obama selected Hoenig, 65, to succeed Acting Chairman Martin J. Gruenberg, whose nomination for the top post is awaiting Senate approval.
Hoenig, who was president of the Kansas City Fed for 20 years, repeatedly urged the Federal Open Market Committee to tighten monetary policy to stifle inflation and prevent asset-price bubbles. He would join the FDIC as the agency takes on broader responsibility for systemically important financial firms, including resolution authority under the Dodd-Frank Act.
The new duties expand the FDIC’s traditional role of insuring deposits at 7,513 banks and savings associations, and promoting safety and soundness by identifying, monitoring and addressing risks to financial institutions.
Taking effective action is always a “challenge in bank supervision,” Hoenig told lawmakers in response to a question about how corrective action has failed to prevent losses to the FDIC’s deposit insurance fund in the past.
“It is very difficult to anticipate” what losses are going to be, Hoenig said, adding that regulators need to ensure banks have a strong capital base and assets.