Federal Reserve of Kansas City Chief, Thomas Hoenig and the FDIC are actually doing something about failing banks! Hoenig and Sheila Bair have both been vocal about bad economic policy in the past and are going strong now too!

Hoenig is pushing for letting too-big-to-fail banks fail! He is convening a meeting of Fed Chiefs and directors in Wyoming and will be pursuing a lively debate on the issue on purpose. Bernanke is set to speak tomorrow. Bernanke himself talked about letting big banks fail to avoid moral hazard in a June 24 testimony. Hoenig has been a champion of the real facts -- overconcentration in banking has led to a more unstable and risky system. He suggests we let them fail when they do and allow the shreholders to take the hit instead of taxpayers. Perfect answer to moral hazard and ballooning US debt.

The FDIC is returning to a solution oft proposed in the past - splitting up failed banks into bad and good in order to get them off of the government's books! Hooray. We'll see if there will be buyers from the private market. Either way, trying something to speed up the reslution process is a tribute to making banks own up to their own mistakes.

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