In a speech in 1999, shortly after Congress repealed the Glass-Steagall Act, the Depression-era law that separated investment banking from commercial banking, he warned that “in a world dominated by mega-financial institutions, governments could be reluctant to close those that become troubled for fear of systemic effects on the financial system.”
Sure enough, in 2008, the Fed helped sell Bear Stearns to JPMorgan Chase, rescued the American International Group and, after the collapse of Lehman Brothers, bailed out the financial system.
The crisis has only made the biggest banks even bigger. “They have enormous power,” Mr. Hoenig said. “Just look at their lobbying expenses. I use the word — and it’s a fairly flammable word — oligarchy. These things are huge and powerful, and that’s where the money is. This country through its history has abhorred concentration of financial power, and for good reason.”
Tuesday’s Fed vote will be Mr. Hoenig’s last, because the presidents of the Fed’s regional banks, other than New York, share votes under a rotation system. Mr. Hoenig does not have a vote next year, and he must retire after he turns 65 in September.
As for his future, Mr. Hoenig is certain that he will not follow other Fed veterans who have gone to work on Wall Street. “I can tell you one thing,” he said. “I’ll never work for a too-big-to-fail bank.”