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Our savior.........
Who will spend our $700 billion? Meet 35-year-old Neel Kashkari
Posted Oct 8th 2008 2:30PM by Michael Rainey
Filed under: Recession, Financial Crisis
His name is not exactly familiar and his official title is a bit much -- Interim Assistant Secretary of the Treasury for Financial Stability and Assistant Secretary of the Treasury for International Economics and Development -- but 35-year-old Neel Kashkari is now one of the most powerful people in the global economy. As the head of the new Office of Financial Stability, it's his job to start spending the $700 billion Congress approved to stabilize the financial system.
As some commentators enjoy pointing out, Kashkari is a former rocket scientist, having earned Bachelor's and Master's degree in engineering from the University of Illinois and worked as a mechanical engineer at TRW, where he developed latches for the the Next Generation Space Telescope. He left engineering for finance, parlaying an MBA from Wharton into a gig at Goldman Sachs (NYSE: GS), where he rose to Vice President, specializing in information technology investment banking.
So there's little doubt that he's a smart and hard-working guy. And in the current administration, that's a great accomplishment.
But the question isn't whether Kashkari is smart. The question is whether he has any idea how to use all that money to stabilize the global financial markets. And a quote from Kashkari I dug up does not inspire confidence. In September, at the right-wing American Enterprise Institute, Kashkari reportedly declared, "I'm a free-market Republican."
It's no surprise, of course, that a Bush administration official would describe himself as a free-market Republican. But it does suggest that Kashkari may have trouble figuring out how to restore confidence in those supposedly free markets.
It's important to remember that unregulated free markets in debt instruments is how we got into this mess in the first place. And more generally, it's pretty clear that the free-market ideology espoused by the Republican party (and embraced by many Democrats too) bears much of the blame for our current economic situation.
Whatever the solution may be, it certainly involves violating free-market principles over and over again. Insolvent banks cannot fail. Worthless assets must be bought and sold. And the government must lead the way.
I'm sure Kashkari is plenty smart enough to create new programs to accomplish these goals. But I'm not sure that he and the people he works for will be willing to violate their own political principles to get the job done in the most effective way. Kashkari was involved in the HOPE NOW Alliance, the Bush administration's response to the subprime mortgage crisis. By most accounts, HOPE NOW has been a failure, largely because it serves corporate interests more than the needs of subprime mortgage holders. It seems that when pro-business political ideology meets real practical needs, ideology wins out.
Let's hope Kashkari meets with great success. I just wish other senior managers with a little bit more experience -- and a more complex understanding of the politics of the situation -- were along for the ride.
AI
