Thursday, October 9, 2008

The 700 Billion Dollar Man

"I'm a free-market Republican."—Kashkari, at an American Enterprise Institute conference, Sept. 19, 2008

Well we may find out however "he is not expected to stay on at the Office of Financial Security when a new administration is installed in January."

But then who knows? He might just change his mind.
Meanwhile all eyes will be on him as he decides how to spend the government's $700 billion fund.

Kashkari to take onus of bailout

At Neel Kashkari's confirmation hearing in June, Senate banking committee Chairman Christopher J. Dodd stumbled over both the nominee's first and last name.

It's unlikely Mr. Dodd will repeat his mistake now that the 35-year-old Treasury Department official and former Goldman Sachs Group Inc. investment banker has been tapped to set up and start spending the government's $700 billion fund to rescue Wall Street and prevent a global economic implosion.

Just three days after Congress approved the bailout plan, the Treasury Department, as expected, named Mr. Kashkari interim head of the new Office of Financial Stability. Mr. Kashkari, a close aide to Treasury Secretary Henry M. Paulson Jr., has been assistant secretary for international affairs.

The son of Indian immigrants with a master's degree in aerospace engineering, Mr. Kashkari faces a major challenge just filling in the spaces on the sketchy blueprint approved by Congress last week. The first purchases are not expected until mid-November.
Anthony Ryan, acting undersecretary for domestic finance, said the program's first priority is to hire private financial analysts and asset managers to oversee the program, designed to buy up huge numbers of bad mortgages and mortgage-based securities now burdening the books of the nation's lenders.

"We're going to need people and we're also going to need to tap into the services of financial institutions and other advisers to ensure that we assess this appropriately, we think through some of the challenges, and we implement it appropriately," Mr. Ryan said in an interview on Bloomberg Television.

The Treasury Department on Monday released a set of 14 preliminary guidelines for selecting asset management contractors and avoiding conflicts of interest. Many of the firms eligible to assist already have links to the thousands of banks and financial institutions that could be part of the government buyout.

The department set a Wednesday afternoon deadline for applications for the first three contracts - to manage mortgage securities, whole loans and the auction of investments.

Treasury officials said they may not use customary competitive bidding practices on some of the contracts because of the "compelling urgency" to resolve the financial crisis.

The rescue package gives Mr. Kashkari and the Treasury Department only the barest instructions on how to structure individual deals, when they should be made and how to set prices for the now-worthless mortgage-related assets.

While the credit crisis built and the rescue plan was debated in recent weeks, Mr. Kashkari, along with fellow Paulson confidants Robert Hoyt, Treasury general counsel, and Phillip Swagel, assistant secretary for economic policy, briefed top lawmakers and staffers repeatedly on Capitol Hill. As chairman of the Senate Banking, Housing and Urban Affairs Committee, Mr. Dodd, Connecticut Democrat, now should be familiar with Mr. Kashkari's name.

Mr. Kashkari originally trained as an aerospace engineer. His wife, Minal, still works in the field for Lockheed Martin.
After obtaining a master's degree in business administration from the Wharton School of Business in 2002, he worked for Goldman Sachs in its San Francisco office, dealing mainly with financing for high-tech firms.

He was recruited to the Treasury by Mr. Paulson, a former chairman of Goldman Sachs, in 2006, and advised the secretary on issues that included expanded trade with India, energy policy and the emerging weaknesses in the U.S. housing market.

The young Treasury official will have virtually unprecedented power over a major segment of the U.S. economy, but not for long. He is not expected to stay on at the Office of Financial Security when a new administration is installed in January.

cResearcher Clark Eberly contributed to this report.


David D said...

Superbly written article, thank you!

apackof2 said...

Thanks for leaving your comment