Fed's Hoenig Spooks Market (DJI)

Kansas City Federal Reserve Bank President Thomas Hoenig said today that interest rates kept too low for too long encourage risky financial behavior. Hoening recommended raising interest rates to prevent another asset bubble and bust.

Hoening said, "I am confident that holding rates down at artificially low levels over extended periods encourages bubbles, because it encourages debt over equity and consumption over savings."

Hoening has been a dissenting voter in the Federal Reserve Board this year as he is against the central bank's promise to hold rates exceptionally low for an extended period. Hoening said the Fed could raise rates to around 1 percent, which would still keep borrowing costs at historically low levels.

Hoening's comments helped spark a selloff on Wall Street that saw the blue chip Dow Jones Industrial Average (DJI) drop 72.47 points, or 0.66%, to 10,897.