The president of the Federal Reserve Bank of Kansas City once again called for an increase in the benchmark fed funds rate away from zero to stabilize the economy and “foster a more sustained housing market.” Thomas Hoenig told the National Association of Realtors in New Orleans that moving the rate off zero, where it’s been since December 2008, represents “highly accommodative policy.” Earlier this week, the Federal Open Market Committee elected to keep the rate between 0% and 0.25% and also announced plans to purchase another $600 billion of Treasury bonds, in a move that’s become known as QE2. Hoening has voted against all seven FOMC decisions this year because he believes keeping the ZIRP in place inhibits the committee’s ability to adjust policy when needed, and eventually may lead to inflation. He also wonders if the benefits of the Fed’s decision to essentially print more money outweigh the costs. On Friday in Louisiana, Hoenig characterized the housing collapse of the past few years as “a classic asset-price bubble spurred by low interest rates, easily accessible and often-unsound financing, over-optimism about housing-price trends and a high – and difficult to control – level of subsidies that flowed into housing.” He said the government subsidies have to end and there needs to be greater market discipline and greater long-term stability. “In brief, housing policy is badly flawed, and today’s budget environment requires reform,” Hoenig said. He supports scrapping Fannie Mae and Freddie Mac in favor of a new “public entities that focus solely on the securitization of conventional, conforming mortgages with strong underwriting standards, tight public oversight and balance sheets limited to holding amounts necessary for warehousing loans to be securitized.” Or allow the new private entities sole authority to securitize pools of conforming mortgages. “It is time for a significant change,” Hoenig said. “We must move toward a system with fewer subsidies and misdirected incentives.” Write to Jason Philyaw.