Former Goldman banker leads bailout

Former Goldman banker leads bailout
By EAMON JAVERS & LISA LERER | 10/7/08 4:38 AM EDT


When he took to the lectern at the American Enterprise Institute on Sept. 19, Neel Kashkari was a little-known Treasury official on hand to give a PowerPoint presentation on obscure aspects of the nation’s mortgage markets. The small audience gave him a polite but brief round of applause.

Two weeks later, the soft-spoken 35-year-old former Goldman Sachs banker is the most influential money manager in the world.

Named on Monday as the interim head of the Treasury Department’s new Office of Financial Stability, Kashkari will oversee the $700 billion effort to purchase distressed mortgage-related assets from the private sector in a now-desperate effort to save the United States and the global economy from complete economic collapse.

The appointment to run the so-called Troubled Assets Relief Program instantly catapults Kashkari into the same league of global capital titans as Sheikh Ahmed bin Zayed Al Nahyan, who runs the $875 billion Abu Dhabi Investment Authority; Lou Jiwei, chairman of the $200 billion China Investment Corp.; and even the richest man in the world, Warren Buffett, the CEO of Berkshire Hathaway, with its market capitalization of more than $200 billion.

It’s an astonishing leap for a man who started his career as an aerospace engineer, got his MBA at The Wharton School at the University of Pennsylvania six years ago and has been in Washington only two years.

Kashkari takes office at a time of deep anxiety in the financial world. His appointment came on a day in which the Dow Jones industrial average suffered yet another dramatic sell-off, dropping 369.88 points, or 3.6 percent, to close at 9,955.50, below the psychologically important 10,000 mark.

Kashkari, it turns out, was one of the original authors of the bailout plan. In a secretive effort over “many, many months,” he was a part of a small team at Treasury working on the plan, said David H. McCormick, under secretary for international affairs.

“It was certainly a contingency that we hoped we wouldn’t need to consider.”

For the next three months, Kashkari will make a slew of decisions about the colossal pool of capital at his disposal — which assets to buy, how to make the purchases and how much to pay. He’ll likely serve until the end of the Bush administration in January. But if he’s successful in jump-starting the credit markets, he might be kept on in a Barack Obama or a John McCain administration for sake of continuity.

In his comments to the American Enterprise Institute, Kashkari focused mostly on explaining technical aspects of financial instruments called “covered bonds.” But he also sketched out Treasury’s broad approach to the housing meltdown.

Although he’ll direct the largest government intervention in the markets in American history, Kashkari told the AEI audience: “I am a free-market Republican.”

“We need to enable the necessary correction to move forward as quickly as possible,” Kashkari said at one point, cutting the air with his hands for emphasis. “We’re having a necessary correction, and we don’t want to do anything to slow it down. We need to get through it.”

Kashkari also made it clear that there’s no “silver bullet” to fix the housing market. “There’s no one tool that’s going to solve all of our problems,” he said.

Kashkari, an Indian-American, grew up outside Akron, Ohio, an area hit particularly hard over the past year by the subprime mortgage crisis. He graduated from the University of Illinois at Urbana-Champaign with bachelor’s and master’s degrees in engineering.

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Before embarking on his career in finance, he developed technology for NASA space missions at TRW, a satellite maker later acquired by defense contractor Northrop Grumman.

He graduated from the Wharton School in 2002 and went to work for Goldman Sachs, where he advised companies on global mergers and acquisitions as head of the bank’s IT security investment banking practice in San Francisco.

Kashkari is not known as a strong partisan. He has made only one political contribution in recent years, according to the Center for Responsive Politics, donating $2,000 to President Bush’s reelection campaign.

When Paulson was named Treasury secretary in 2006, Kashkari contacted the former Goldman Sachs CEO about a job in public service — a well-traveled route in recent administrations.

At Treasury, Kashkari worked to contain the spread of financial damage from the collapse of the subprime mortgage market. He was the department’s liaison to HOPE Now, an alliance of private-sector loan services, counselors and investors that aimed to help struggling homeowners. For months, the administration touted HOPE Now as a key part of the government’s response to the mortgage meltdown.

“They’ve got a guy who doesn’t accept failure as an option,” said Faith Schwartz, executive director of HOPE Now. “I’m a huge fan of Neel’s. He’s a pleasure to work with.”

Kashkari moved up the ranks quickly. In July, he was sworn in as Treasury’s assistant secretary for international affairs.

“He’s a thoughtful leader. He’s someone who is patient and takes the time to understand the issues, but he is able to drive towards a solution,” said Steve O’Connor, senior vice president of government affairs at the Mortgage Bankers Association. “I’ll say this: When we went to meet with him, we needed to be prepared.”

Kashkari’s Treasury appointment sparked little discussion on Capitol Hill beyond a few questions about how he would maintain an open investment climate for foreigners in the United States. He was confirmed by the Senate along with dozens of nominees for different agencies as part of a deal brokered between the White House and Senate Democrats.

In his Senate confirmation statement, Kashkari touted his earlier achievements leading Treasury initiatives to increase engagement with India and encourage the development of alternative fuels and helping to manage the response to the housing crisis.

“If confirmed, I look forward to working with the administration, Congress and the staff at the Department of the Treasury to promote global economic growth, financial market stability and open markets for U.S. goods and services,” he said.

Obviously, Kashkari has done much more than that. As the foreclosures blossomed into a full-on market meltdown, he became one of Treasury’s lead negotiators of the bailout plan on Capitol Hill. He spent days and nights working Congress alongside Treasury’s general counsel, Robert Hoyt, and its head of legislative affairs, Kevin Fromer.

Now, Kashkari will try to finish the job, taking on a position that launches the former mid-level banker into the most elite circles of the financial world.

“The experience he’s getting is just unbelievable,” said Andrew Busch, a global markets strategist at BMO Capital Markets who consults with both the White House and the Treasury Department.

“What they are doing with this plan is reshaping American finance as we know it,” Busch said. “It’s going to look vastly different. And if you can understand that, you can be successful in that environment.”

http://www.politico.com/news/stories/1008/14346.html

 

at 35 I'm sure he has a wealth of experience. Gawd- can't they at least put an adult in charge???

 

"Kash-n-Karri" from our pockets to THEIRS!!!

What a complete JOKE!