Federal Reserve Bank of Kansas City President Thomas Hoenig will retire Oct. 1, marking nearly four decades of central bank service.
The announcement by his bank Friday was not unexpected, as the official was widely known to be approaching the central bank’s mandatory retirement age. Hoenig is the longest served leader in the Federal Reserve system, having taken office in 1991.
The central banker has cut a high profile role as the most persistent internal critic of Fed policy. The policymaker voted against the consensus of the Federal Open Market Committee at every gathering last year. He has feared the extremely easy policy pursued by the bank is setting the stage for future financial imbalances, and he has fretted that the Fed is pursuing what he sees as an emergency policy at a time the economy is on the mend.
Hoenig argued in favor of interest-rate hikes last year when most other officials wanted the funds rate to stay at zero percent, where it still rests. He still believes the Fed should raise rates, even as it moves forward with its controversial $600 billion plan to buy longer dated Treasurys, in a bid to lower high unemployment and push underlying inflation levels up toward levels central bankers are more comfortable with.
Hoenig, in recent remarks, has said the signs of financial excess he feared last year may now be arriving in the form of rising commodity prices and surging prices for farmland. He has also been critical about whether massive financial sector reform legislation will accomplish what legislators wanted and has argued the nation’s largest financial institutions continue to possess too-big-to-fail status.
The Kansas City Fed leader has long been willing to use his FOMC vote to counter the position taken by other central bankers. According to data from Wrightson ICAP, he has dissented 12 times in 67 votes, going against the majority in 18 percent of his votes. Only Richmond Fed President Jeffrey Lacker, Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser have dissented more, on a relative basis.
The Kansas City Fed said it will begin searching for a replacement under a committee led by Terry Moore, president of the Omaha Federation of Labor, AFL-CIO. The committee will be assisted by EFL Associates, based in Leawood, Kan.
Presidents of regional Fed banks are chosen by their respective boards of directors, subject to the approval of the Federal Reserve in Washington. That process has garnered the Fed some grief over recent years given that the boards comprise local area business leaders and in some instances are dominated by financial institutions regulated by the Fed, raising conflict of interest questions.
Hoenig’s coming exit is another step on a significant changing of the guard at the Fed. The San Francisco Fed just got a new boss in John Williams, who replaced Janet Yellen, who ascended to the central bank vice chairman slot. A number of economists detect in the new circle of policymakers a more dovish bent to monetary policy, though these officials still must contend with the hawkish views held by Lacker, Fisher and Plosser.
In writing of his coming retirement in a bank publication, Hoenig said: “I know that the person chosen as the next president of the Federal Reserve Bank of Kansas City will need to have a proven commitment to the structure of the Federal Reserve System, knowledge of our national economy and a deep understanding of the seven states of the Tenth District.”
