KANSAS CITY, Mo. — All year, Thomas M. Hoenig has been saying no.
Thomas M. Hoenig has dissented from many of the Federal Reserve's moves.
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Thomas Hoenig, left, with Masaaki Shirakawa, governor of the Bank of Japan, in August.
As the lone dissenter on the Federal Reserve committee that sets interest rates, Mr. Hoenig, the president of the Federal Reserve Bank of Kansas City, has been a persistent skeptic of just about everything the Fed’s chairman, Ben S. Bernanke, has done to try to stimulate the flagging recovery.
Mr. Hoenig’s latest, loudest objections, aimed at the Fed’s risky $600 billion infusion into the markets to reinvigorate the economy, have made him a champion of the Fed’s critics in Congress, on Wall Street and among business leaders, who, like Mr. Hoenig, fear that the central bank is risking runaway inflation, asset bubbles and a weakened dollar.
At 64, Mr. Hoenig has witnessed jolts in the nation’s economic history that make him deeply skeptical of short-term fixes. He says he believes the Fed’s tools for fixing the economy in the short run are limited and the potential for things to go disastrously wrong is very high.
If it were up to him, he would keep interest rates very low, but would not promise to keep them at essentially zero for “an extended period,” as the Fed has announced. He says he thinks that trying to lower long-term rates, as the Fed is doing by buying bonds, is a mistake. The recovery, however slow and painful, he says, cannot be hurried.
As the longest-serving regional Fed president, his views are shaped by the uncontrolled inflation of the 1970s, the spike in land prices that followed and the ensuing banking and thrift crises.
To him, Mr. Bernanke’s plan is “a dangerous gamble” and “a bargain with the devil,” strong words that have rankled some officials of the Fed, where dissent is tolerated but not celebrated.
In an interview on Dec. 6 in his office here, he did not appear to relish going against the grain, but lately he has not been running from the spotlight. “It’s never easy to disagree against a majority,” he said. “It’s hard. It’s not something that I take lightly.
“Some people think I should be more part of the group,” Mr. Hoenig said. “I’m not a group person.”
A month after the Fed announced its intentions to buy bonds and push down interest rates, investors have done the opposite by driving up long-term rates, hardly a help to a sputtering recovery.
Mr. Hoenig, who is likely to vote no again on Tuesday when the committee meets for the last time this year, said it was too early to say whether the market reaction and the uncertainty had vindicated his position.
“I don’t want to say that I’m right and someone else is wrong,” he said. “Only time will tell whether I’m correct.”
The son of a Midwestern plumbing contractor, Mr. Hoenig (pronounced “HAWN-ig”) spent his career at the Kansas City Fed. He is cautious, courtly and hardly a partisan, though he recently addressed Congressional Republicans at their invitation. In his unwavering dissents, seven this year, and in his wariness of Wall Street, his views seem rooted in the agrarian and populist tradition that is mistrustful of concentrations of power.
He has called for breaking up giant Wall Street banks and severely restricting their trading activities, a stance that has endeared him to some liberals. He is commonly characterized as an inflation hawk, a label Mr. Hoenig rejects as overly simplistic. If he is hawkish on anything, he says, it is financial stability.
“I don’t like having unemployment at 9.8 percent,” he added. “It’s just unacceptable.” He concedes, however, there is not much the Fed can do about it.
As a young economist, he witnessed the rampant inflation of the 1970s, which was curbed only after Paul A. Volcker became Fed chairman in 1979 and promptly raised interest rates to double-digit levels, setting off two painful recessions. The strong medicine worked; inflation has been largely under control since 1982.
During the 1980s, Mr. Hoenig worked in bank supervision and regulation at the Kansas City Fed, where an agricultural crisis and land bubble prompted a string of bank failures. Those included the collapse of Penn Square Bank in Oklahoma City in 1982, Mr. Hoenig’s first experience managing a crisis, and later the Continental Illinois insolvency, then the nation’s largest bank failure.
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