Banks Seen as Fed Policy Conduits
Incoming Kansas City Head Urges Focus on Their Role
Thomas Hoenig, president-designate of the Federal Reserve Bank of Kansas City, wants to see the Fed focus more closely on the role of banks in carrying out central-bank policies.
Mr. Hoenig's interest in banks and how they may be affected by Fed policies comes from his backgound in supervision, an unusual career path for a Federal Reserve Bank president.
Currently senior vice president in charge of bank supervision for the Fed's 10th district, Mr. Hoenig will succeed Roger Guffy as president on Oct. 1 and becomes a voting member of the Federal Open Market Committee in January.
Speaks of New Focus
"I hope to bring to the region and to the Fed system the importance of institutions to policy issues," Mr. Hoenig said in an interview during a recent conference in Wyoming sponsored by the Kansas City bank.
Mr. Hoenig, 44, is a native of Fort Madison, Iowa. He received a master's and a doctorate in economics from Iowa State University and served a year in Vietnam before joining the Kansas City Fed in 1973 as an economist in the banking supervision area.
The seven states supervised by the Kansas City Fed have about 1,250 bank holding companies and 130 state-chartered banks that are members of the Fed system.
The district "hit a wall in the 1980s," said Mr. Hoenig, as agriculture, energy, and real estate went into a tailspin.
Between 1982 and 1990, well over 150 banks failed in the Kansas City district, which encompasses Colorado, Kansas, Nebraska, Oklahoma, Wyoming, western Missouri, and northern New Mexico.
In 1986, First National Bank of Oklahoma City, which had $2 billion in assets, failed.
"You learn a lot about institutions in that kind of climate," Mr. Hoenig said. "We experienced the credit crunch."
He declined to discuss his views on monetary policy, partly because Roger Guffey is still in office and also because he does not want to be typecast.
Clarity in Standards
"The Kansas City Fed has no label. I want to contribute to Fed policy in a positive way," he said, noting the Fed has always been a consensus builder.
But his feelings on supervision are clear. He is in favor of early, clear setting of standards for regulators to follow. He also advocates strong international supervision.
"I think you have to set up prudential standards that everyone understands; then you can supervise. You can't work in a reactive framework," he said.
While he sees some conflicts in commercial banks doing investment banking, Mr. Hoenig said "safeguards can be built in to allow them to go forward."
As for the Federal Reserve System itself, Mr. Hoenig said some organizational changes are likely as the United States moves toward national banking. Some consolidation of central-bank automation processes is already under way.