Kansas City Fed Starts Search for Successor to Hoenig
The search committee will be led by Terry Moore, the president of the Omaha Federation of Labor and a member of the regional bank’s board of directors, according to a statement on the bank’s website.
During his 20-year career as leader of the Kansas City Fed, Hoenig has repeatedly urged the central bank to tighten monetary policy to prevent inflation from accelerating and asset price bubbles from developing. He voted eight straight times last year against record monetary stimulus led by Chairman Ben S. Bernanke, tying former Governor Henry Wallich’s record in 1980 for most dissents in a single year.
“His legacy is highlighting the concerns about serious Fed policy mistakes and the quantitative easing policy,” said William Ford, a former president of the Atlanta Fed who teaches at Middle Tennessee State University. “It took a lot of courage to be the lone dissenter.”
“Bernanke is a bit out on a limb with quantitative easing, and Hoenig is one of the folks shaking the tree,” Ford said, referring to the Fed’s plans to buy $600 billion in Treasury securities through June.
Hoenig will retire exactly two decades after beginning his tenure in 1991. He is required under internal Fed rules to retire at age 65, an age he will reach in September.
“As directors, our challenge is to identify a successor who will continue the high standards of performance that Tom has established for the Tenth District,” Moore said in a statement.
Hoenig voted in November against the Fed’s decision to buy bonds to stimulate growth and reduce unemployment. The so-called quantitative easing following a $1.7 trillion asset program that ended in March 2010.
While not dissenting as voters on policy this year, Philadelphia Fed President Charles Plosser Dallas and Fed President Richard Fisher have joined Hoenig in criticizing the bond purchases. Fisher said this month he may vote to curtail the program if he deems it to be “counterproductive.”
In a speech March 2 in New York, Hoenig described the purchases as “monetizing debt,” which he said will generate inflation in a few years. While he would avoid “shock therapy” of selling assets all at once, Hoenig said the Fed needs to explain how it will unwind its balance sheet.
Hoenig also told the Council on Foreign Relations the central bank should raise its target federal funds rate to 1 percent from near zero, then pause to assess the economy before raising the rate again to a higher rate, perhaps 2 percent.
“Tom Hoenig is a leader in every sense of the word,” Paul DeBruce, the chairman of the Kansas City Fed’s board of directors, said in a statement.
“The recent financial crisis and its aftermath provided those outside the Federal Reserve with an appreciation for the vision, expertise and thoughtful analysis that has made Tom one of the most valued participants in central banking around the world,” said DeBruce, who is the chief executive of DeBruce Grain, Inc. in Kansas City, Missouri.
Hoenig’s views have been praised by Republican critics of Bernanke in Congress, including former U.S. Senator Sam Brownback of Kansas, who last year suggested he would be a better chairman than Bernanke.
While “Tom has been a steady performer” in his career, “this past year is probably the one that he has made his greatest contribution by way of his dissents,” said former Atlanta Fed research director Robert Eisenbeis, chief monetary economist at Cumberland Advisors Inc. in Sarasota, Florida.
Hoenig lost his vote on monetary policy this year as part of an annual rotation among 11 of the 12 leaders of the regional Fed banks. The heads of the Chicago, Philadelphia, Minneapolis and Dallas banks vote this year. The head of the New York Fed has a permanent vote.
The last opening among Fed bank presidents was filled by John C. Williams, former research director of San Francisco Fed, who was promoted on March 1 to be that bank’s president.
Hoenig, who joined the bank in 1973 as an economist and worked in supervising banks much of his career, also has warned that Congress has failed to solve the problem of large bank bailouts.
In February, he called for breaking up big banks into smaller institutions to end an implied government safety net for the largest banks. He also has urged that banks be required to have more capital as a cushion against losses.
The Kansas City Fed is one of the 12 regional banks, formed in 1913, which aid in supervising commercial banks and processing checks as well as reporting on regional business conditions. The Kansas City district represents Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico and the western third of Missouri.
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