IN 2010 THOMAS Hoenig, then the president of the Federal Reserve Bank of Kansas City and a member of the central bank’s Federal Open Market Committee, thought he was seeing history repeat itself.
In the early 1980s, when he was a vice president at the Kansas City Fed overseeing bank examiners, he had a front-row seat to a boom and bust in land and oil asset values, which gutted the Midwest’s economy. That painful experience stemmed largely from the Fed’s loose money policy in the 1970s, followed by that policy’s sudden reversal. Hundreds of banks had loans that depended on soaring asset prices, and hundreds of banks failed. Hoenig was responsible for helping decide which banks would live and which would die. He saw “lives were destroyed in this environment” and
