Fed’s Hoenig Urges Restricting Banks to Loans, Deposits

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.

“The consequence of expanding the safety net to an ever-increasing range of activities is to invite a repeat of our most recent crisis,” Hoenig said today in a speech in Philadelphia. “With separation of activities, risks will remain in the financial system, but unlike the past decade, this risk will be priced more correctly and failure can be resolved more equitably.”