Publication Date


Document Type

Special Contribution


Remarks by Thomas M. Hoenig, President Federal Reserve Bank of Kansas City Kansas City, Missouri

It is a pleasure to be here today as part of this panel on deposit insurance and financial modernization. Over the past twenty years, the world of finance has changed dramatically. During this period, we have seen phenomenal growth of new types of securities and derivatives markets, the globalization of finance and capital flows, and a blurring of the distinction between banks and other financial intermediaries.

These changes in financial markets have led to public debate among Congress, financial regulators, and financial industry participants about the appropriate role for banks, the so-called "financial modernization" debate. Much of this discussion has centered on the question of whether we should expand bank powers. I believe, however, that this question is not very useful to us as policymakers. Modernization and expanded powers are clearly necessary to allow banks to adapt to the changing financial world. In my view, a more relevant question is "how does the expansion of bank powers affect the exposure of the deposit insurance system and the other components of the safety net?"