As a young economist, he witnessed the rampant inflation of the 1970s, which was curbed only after Paul A. Volcker became Fed chairman in 1979 and promptly raised interest rates to double-digit levels, setting off two painful recessions.
The strong medicine worked; inflation has been largely under control since 1982.
During the 1980s, Mr. Hoenig worked in bank supervision and regulation at the Kansas City Fed, where an agricultural crisis and land bubble prompted a string of bank failures.
Those included the collapse of Penn Square Bank in Oklahoma City in 1982, Mr. Hoenig’s first experience managing a crisis, and later the Continental Illinois insolvency, then the nation’s largest bank failure.
Mr. Hoenig said he believed the Fed had not always learned from its mistakes.
By keeping interest rates too low for too long, in his view, the Fed contributed to the dot-com bubble that burst in 2001 and the even bigger housing bubble that popped in 2007. (Before this year, Mr. Hoenig had dissented four times, in July 1995, May and December 2001 and October 2007, all in opposition to lowering short-term interest rates.)
“It is my concern that, by understandably wanting to see things move more quickly, we create the conditions for repeating the mistakes of the past,” he said.
Mr. Hoenig’s mantra is that monetary policy works with “long and variable lags,” meaning that the consequences of today’s policies may not be felt until much later.
By keeping short-term interest rates near zero, as the Fed has done since December 2008 — and which he supports but not indefinitely — the central bank is increasing the risk of inflation and instability down the road, he says.
But most Fed officials say they believe that Mr. Hoenig’s worries are exaggerated.
In a televised interview this month, Mr. Bernanke said he was “100 percent” confident of the Fed’s ability to tighten monetary policy and raise interest rates when the time came, and called fears of inflation “way overstated.”
Other economists say Mr. Hoenig’s viewpoint has seemed inflexible.
“I find it hard to understand why Hoenig is still worried about inflation when the obvious trend is downward, toward lower inflation with a risk of deflation,” said Joseph E. Gagnon, a former Fed economist who is at the Peterson Institution for International Economics in Washington.
Mr. Hoenig’s contrarian disposition partly reflects his Midwest upbringing, far from the Wall Street-Washington axis of influence.
The second of seven children, Mr. Hoenig grew up in Fort Madison, Iowa.
He attended a small college in Kansas, was drafted into the Army and served a year in an artillery unit in Vietnam, then received a Ph.D. in economics at Iowa State.
He joined the Kansas City Fed in 1973 and became president in 1991.
Lu M. Cordova, the chairwoman of the Kansas City Fed’s board, said Mr. Hoenig did not seek attention.
Indeed, he sought the board’s guidance before he delivered a March 2009 speech, “Too Big Has Failed,” which received widespread notice.
“He really agonized about whether to speak out or not,” she said.
Even critics of Mr. Hoenig acknowledge he has been prescient.
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, a train enthusiast who reads biography and history in his spare time, 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.”