Fed's Hoenig: Keeping Rates Too Low 'Dangerous Gamble'

"They are not to do anything they please to provide for the general welfare, but only to lay taxes for that purpose. To consider the latter phrase not as describing the purpose of the first, but as giving a distinct and independent power to do any act they please which may be good for the Union, would render all the preceding and subsequent enumerations of power completely useless. It would reduce the whole instrument to a single phrase, that of instituting a Congress with power to do whatever would be for the good of the United States; and as they would be the sole judges of the good or evil, it would be also a power to do whatever evil they please.... Certainly no such universal power was meant to be given them. It was intended to lace them up straightly within the enumerated powers and those without which, as means, these powers could not be carried into effect." --Thomas Jefferson, Opinion on National Bank, 1791 (I challenge you to read this. It's amazing stuff, really... JFK was right when he said, "[This is]...probably the greatest concentration of talent and genius in this house except for perhaps those times when Thomas Jefferson ate alone," while describing a dinner for Nobel Prize winners, 1962.

Fed's Hoenig: Keeping Rates Too Low 'Dangerous Gamble'

Excerpts:

The Federal Reserve is undertaking a "dangerous gamble" by keeping rates at near zero for so long, and must start raising rates or risk damaging the nascent U.S. recovery, a top Federal Reserve official said on Friday.

The Fed took the further step of saying it would begin reinvesting cash from maturing mortgage bonds to buy more government debt. The decision reflected the Fed's concern over the slowdown in the economic recovery it helped bring about by cutting rates to near zero in December 2008 and buying nearly $1.3 trillion in mortgage-linked debt to shore up the housing market.

U.S. central bank policies weren't the only targets of [Kansas City Reserve Bank President Thomas] Hoenig's criticism. Hoenig also expressed doubt that international and domestic policies designed to prevent another financial crisis will be effective.

Internationally, the Basel Committee, which is working on new global banking standards, has agreed to establish capital-to-asset ratios for the largest global banks at levels that leave too small a margin for error, he said.

A newly created consumer bureau will bring benefits only if its resources are directed toward payday loan providers and other financial institutions that are currently underregulated, he said.

And the part of the law designed to end the need for fresh government bailouts of failed financial institutions may not work because it requires a complex set of steps that will be cumbersome to put into effect.....