The President and CEO of the Kansas City branch of the Federal Reserve, Thomas M. Hoenig, sheds some serious truths on the financial crisis we are experiencing. A very refreshing and reasonable take on the current situation.

Over the past year, the Federal government and financial policy makers have enacted numerous programs and committed trillions of dollars of public funds to address the crisis. And still the problems remain.

Finally some sense from an inside man!

We understandably would prefer not to “nationalize” these businesses, but in reacting as we are, we nevertheless are drifting into a situation where institutions are being nationalized piecemeal with no resolution of the crisis

Thomas continues to explain everything that the government has done so far that has not worked, including:

• Invested public funds (ie: from already overburdened taxpayers) buying preferred stock in more than 400 financial institutions through TARP
• TARP has used to fund government guarantees of more than $400 billion of securities held by too-big-to-fail-scammers CitiGroup and Bank of America
• Committed more than $170 billion to bail out AIG
• Increased deposit insurance limits and guarantees for bank debt instruments and money market mutual funds

Thomas says we must replace management responsible for the problems and the losses identified must be taken. This, he believes, will restore market confidence.

The trillion dollar question, however, is - who the hell is taking the losses? The taxpayers and their children are!

Yet Thomas argues against the “too big to fail” mantra we are fed from the cretins:

History, however, may show us another experience. When examining previous financial crises, in other countries as well as in the United States, large institutions have been allowed to fail. Banking authorities have been successful in placing new and more responsible managers and directors in charge and then reprivatizing them. There is also evidence suggesting that countries that have tried to avoid taking such steps have been much slower to recover, and the ultimate cost to taxpayers has been larger.

Hoenig fails to address the absurdity of the FDIC and states that we should recognize that FDIC funds may not always be adequate and that Treasury money may be needed. He believes the government should run the failed banks on a bridge basis and operate as a broker. This ought not be the role of government. He also doesn’t address any of the basic issues with the Federal Reserve System, but I suppose as an employee, that would take too much courage. He certainly wants to keep his job with the banking cartel.

But applause to you Mr. Hoenig for parts of your speech. Finally someone on the inside making a little sense. Get the full pdf of his speech.