The response to the mortgage security mess is now winding its way through the government sausage factory and the next level of operational leadership is being revealed. 
This morning, Hank Paulson announced that Neel Kashkari will oversee the $700B program –
The Treasury Department plans to tap Neel Kashkari, an assistant secretary of international affairs and a former Goldman Sachs banker, to oversee the government’s $700 billion financial rescue program, sources familiar with the situation said yesterday.Kashkari has been a close adviser to Treasury Secretary Henry M. Paulson Jr. on the credit crisis and helped draft the legislation for the massive rescue plan. He is expected to run the program on an interim basis until the Treasury finds a permanent head, according to sources who spoke on condition of anonymity because they were not authorized to comment. Kashkari’s replacement would stay on after the next administration takes office in January.
At the tender age of 35, Neel is being handed quite a shopping budget. Then again, often the only thing bigger than a government amplified problem is the government created solution.
The WSJ credits Neel with being a key man behind the scenes who crafted much of the “Paulson Plan” –
[Neel] spent much of his tenure at Treasury helping Mr. Paulson stem the fallout from the housing correction. He helped implement an alliance of mortgage-industry players who joined last year to help homeowners in danger of foreclosure.
Mr. Kashkari was part of the Treasury team that negotiated the asset-repurchase program with Congress, putting in marathon sessions along with Robert Hoyt, Treasury’s general counsel, and Kevin Fromer, the head of legislative affairs. He was also one of the originators of the plan. Last year, he and Phillip Swagel, assistant secretary for economic policy, crafted a proposal called “break the glass” — referring to the emergency nature of using such a tool — which envisioned Treasury buying bad loans and other assets.
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p>Neel’s official bio is up on Treasury’s website and makes for interesting reading that crosses paths with many mutineers –
…Prior to joining the Treasury Department, Mr. Kashkari was a Vice President at Goldman, Sachs & Co. in San Francisco, where he led Goldman’s IT Security Investment Banking practice, advising public and private companies on mergers and acquisitions and financial transactions. Prior to his career in finance, Mr. Kashkari was a R&D Principal Investigator at TRW in Redondo Beach, California where he developed technology for NASA space science missions such as the James Webb Space Telescope.Originally from Stow, Ohio, Mr. Kashkari graduated from the University of Illinois at Urbana-Champaign with a Bachelor’s and Master’s degree in Engineering. He also received an M.B.A. in Finance from the Wharton School. Mr. Kashkari and his wife reside in Maryland.
Googling around, I found a CSPAN clip of Mr Kashkari keynoting an AEI-sponsored event last month on alternatives to Fannie-Mae / Freddie-Mac for mortgage financing. Neel gets introduced about 9:30 into the clip and finally starts speaking around 12 min into it (ch 3).
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Yep, he does bear an eery resemblance to his 62 yr old boss. |
In the clip, Neel describes how a “covered bond” market could be created in the US based in large part on a similar, successful system deployed in the Netherlands and how it differs from our current system. One particularly attractive aspect would be avoidance of the government backstops which I personally hold responsible for the necessity and size of the $700B bail out (although not necessarily the bubble itself).
Regardless of whether you agree with his policy recommendation, Neel comes across as a very bright, articulate technocrat who crisply enumerates where we stand, where he wants to take us, and why. The Q&A (particularly ch13 / Q2) shows him sticking to his guns and handling prickly interrogation with grace and style.
But what good would any of this be if he didn’t make his dad proud?
Feeling like he wanted a change of pace, and wanting to learn more about finance, Kashkari attended Wharton School of the University of Pennsylvania and earned his master’s degree in 1997, said Neel’s father Chaman Kashkari.
“The whole idea was to combine engineering with finance,” said Chaman Kashkari. “He told me the country needed people who have a good concept of engineering and a good concept of finance.”
…Chaman Kashkari said he came to this country from Kashmir, India, before his son was born.
“This country has given to us and given a lot,” he said. “I’m very happy that [Neel] can do something extra special. I’m very happy that Stow has the environment to produce people who do something special.”
Homey’s ditched rockets of one sort for quite a different beast. Either way, it’ll be the ride of his life. 
UPDATE: Longtime mutineer KXB points us at this NPR Profile of Kashkari via the News tab.
I will repeat my comment from ultrabrown here: One day in not too distant future Goldman Sachs will rule all of us. History, Treasury Sec, neel, Ex Head of NYSE Euronext, current head of nyse euro next, John Thain, ex whitehouse chief of staff, Wachovia CEO, Clinton treasury secratary, NJ governor, Governor of Italian central Bank have all worked at Goldman.
Hmmm… it would be interesting to see an interview between Ali Velshi and Neel.
Vikram Pandit at Citibank, and now Kashkari – how come the Indians get called when the damage is done?
he even looks like paulson
he even looks like paulson
…things that make you go hhhmmm….
1 · umber desi said
a few things anecdotes:
they hire talent. a friend of mine, who’s a goldman alumni, madea mid-career move to GS and they hired him even though they had nothing for him to do. He got sent around to various departments looking for a project.
there very accessible. my brokers daughter works at goldman and says everyone has access to top management. i once cold-called the head of research and he called me back that day. not his sec. him.
politics and intellectual pursuits are encouraged. i think they stole this from the IT/VC world, realizing ibanks were loosing talent to this less formal, more bohemian world, they loosened up a bit.
Manju, I agree with your points number 2 and 3. It is good to keep a watch for where the friends in high places are.
speaking of politics, i don’t know if obama was planning to save the keating 5 until the end all along, but now he’s just wacking mccain with it. he’s broken out and now he’s looking to close the deal it seems. what luck. the mccain scandal just happens to thematically // the financial crisis.
all mccain got left is bill ayers. great issue normally, but no one cares when the economy’s tanking.
its official. supporting the bailout is the desi position.
Please. You libertarians can never give it up. Phil Gramm who is on your team (libertarian, atleast fiscally) created this monster with the unregulated CDS market. It is a 54.6 trillion market according to Forbes and although it is basically an insurance policy they did not want it to be a regulated security and hnce came up with this term swap. And just like naked shorts the fact that for a small premium you could buy a swap without actually holding the underlying security lead us into this disaster.
He looks like Paulson. But I know he’s really desi because his name sounds like Cash and Carry
Manju, are you going to have to defend this?
Kolmogaurav, shouldn’t u be using the handle “Mandelbrot” during this times?
12 · Amrita said
its certainly ugly. but times like this call for unprincipled libertine libertarians like myself. it may very well be true that we’d be better off if the market sorted this out, but i honestly don’t have the balls to sit patinetly and see what happens. so welfare for the rich to save the rest of us it is. yikes.
No, not your personal thoughts and feelings, Manju–I meant saying Desis all are fer. Psychological and all.
10 · Nara said
this is a key point it seems but its very hard to untangle. who precisely stands to gain from the short. i know goldman did but they just bought enough to cancel out their long positions (ie using cds as an insurance policy). you’d assume fannie and freddie did the same but yet we’re bailing them out to the tune of 200bill. surely, they didn’t use cds to go even more long on the mortgage market?
presumably there are hedge funds out there who are benefiting but i can’t for the life of me figure out who. all the biggest players appear to be getting wacked, or maybe thats b/c the banks can’t pay up.
i find it hard to believe there are many big money pure speculatios out there, funds making purely directional bets without any arbitrage or insurance angle, knowing the nature of institutional investing; but i’m very curious.
15 · Amrita said
oh, that was just me making fun of identity politcs.
Laughter is the best medicine or what?
That guy is so intense looking in the top picture it felt NSFW.
I hope Neel’s credibility is strong enough to weather the imminent downfall of his mentor’s, who is now known as the man who burnt the Thanksgiving turkey but is still being allowed to cook for Christmas.
Could not find anything on the web as to what Neel’s code of ethics is based on – and that’s what the angry, huddled masses will be scrutinizing him for. We’re really not in a Credit crunch or an economic Hurricane. We’re in an Ethics crunch. There were tons of very bright, articulate technocrats in Frannie, Bear etc, but look where they took us.
Oh I don’t know… Maybe losing their homeland makes them more stoic and helps them to process crisises like most of us cannot?
Consider this episode as a jewellery heist. You could point some of the investment banks as the one who cut through the door or the one who cracked open the safe. But Govt’s Frannie was in charge of the getaway car and disposing off the loot for cash in a manner that nothing could be traced back to them.
M. Nam
Forgot an important point…
Nobody can actually save us. All this means that now Neel is an extremely important part of the Plunge Protection Team. He will play an instrumental role in ensuring that there is an orderly decline of the markets (GDP, Stock markets) to mid-1980’s level (where this whole mess actually began).
I feel for those middle class folks who are retired or are close to retirement. What this means is that those folks will have to plan to work until their very last day on this ball of dirt.
M. Nam
Here is the link:
http://www.indiansformccain.com/
They are outsourcing jobs no American wants to do.
Cheer up Manju, The govt is finally drowning. Now is the time for champagne.
25 · Hitin said
http://ftalphaville.ft.com/blog/2008/10/06/16682/kashkari-whats-in-a-name-an-age-an-affiliation/?source=rss
interesting to read comments by everyone on GS. They do hire brains, I’ll give you that. Then these brains get to work on making sure they create products, not to fit the clients needs, but anything that can make GS money while giving no consideration to the counterparty. I will never buy anything GS is selling unless I approach them with it first. Even then, I am very careful to leave no room for error or “misinterpretation” by GS. I don’t trust anyone in a position of power coming from GS- just how they are wired (and how I am wired after years on Wall Street)- desi or no desi
I think Dinakar Singh and Citadel (to a lesser extent) took a beating but there are plenty of smaller hedge funds who made a killing. You cannot blame them . They played by the “rules”. It is the leverage ratios and the other lack of regulation that needs to be blamed.
The G in the GSEs bothers the libertarians. Initially they blamed the CRA and the community organizers who promoted it so that they can tie this to Obama.That did not work. WSJ editorial page is still trying to create a “private competitor” to Fannie and Freddie. I remember WSJ editorials telling us that with the new CDS market, Fannie and Freddie were redundant.
Please. I am not just blaming the investment banks. But the philosophy that markets can self regulate is why we are here. With unlimited cash (thanks Greenspan!) and no regulation to hold reserves for expected losses and unuually high leverage ratios Washington did create this indirectly but Fannie and Freddie had a very small role. Blame private rating agencies who go from an investment grade to junk in a matter of days without telling us what material conditions have changed.
Question for the brain trust: raise your hands – who’s considering buying stocks right now? Is there an optimistic soul amongst you?
Might it also mean that we might go back to a more communal way of life – mulitiple generations under one roof? (god forbid)
bess: >>who’s considering buying stocks right now?
I would certainly consider buying stocks of companies that make pitchforks. Companies that make stout wooden sticks that can be used as torches are certainly worth looking into, as are enterprises that make good, thick nylon ropes that can support a man’s weight.
Huh? Optimism was the problem! Optimism that house prices would continue to go up, Optimism that credit would be present forever, Optimism that interest rates would stay low, Optimism that stocks would go up forever, Optimism that gas prices would stay 99c/gallon…
What the world needs is a strong decade-long dose of pessimism and a lack of confidence.
Communal living? That will be only for those who are lucky enough to be not homeless.
M. Nam
30 · MoorNam said
wow such enthusiasm for the good ol’
boyzdayz.What the world needs is a strong decade-long dose of pessimism and a lack of confidence.
chinese are optimistic but they have high savings rates. don’t paint with such a broad brush; america needs to live within it means. it did until the 1990s, and the past wasn’t an era of pessimism. mass psychology tends to overshoot; there are opportunities in taking advantage of this irrational tendency. gdp per person vs. year.
btw, is it just me, for does that headshot have a demonic quality to it?
Its a pity, conservative candidate isn’t doing well, when america really needs a pull up by your bootstraps hero. Repubs should send Horatio Alger stories to every american. DVDs of cindrella man would also help.
Any one with spare cash could make a killing. The only risk is obama govt nationalizing stuff.
Eh. The free market was never free.
But anyone who still feels that way, well I’ve got a bridge to sell ya…
Not sure I want to invest in companies that seek to eradicate trolls and ogres.
And a good kick in the pants! Thanks for the laughs, M. Nam.
? I was thinking sexy, evil genius.
burt?
Kashkari is every bit the crook Paulson is and should not be celebrated here.
No. This guy(cr: Manish Vij said it first.) For M. Nam: Karen A. Cerulo Never Saw It Coming. “Katrina, 9/11, and the War in Iraq—all demonstrate the costliness of failing to anticipate worst-case scenarios.”
37 · razib said
Lloyd Blankfein kinda looks like Earnie.
Oh I don’t know… Maybe losing their homeland makes them more stoic and helps them to process crisises like most of us cannot?
Dalai Lama for Treasury Secretary in an Obama administration?
Yes! The Buddhist path to abundance. No optimism needed just develop generosity, cultivate contentment, be honest, and be mindful.
Isn’t the Treasury Secretary required if there is, you know, a Treasury to run?
Dalai Lama for the Head of Department of Depression, Panic Attacks and Sleepless nights!
M. Nam
Can you please read the articles you cite (at least the reputable ones)?
Since Fannie Mae wasn’t an agency of or owned by the U.S. government, this leaves your argument that this economic situation can be reduced to “governmnet” based on pressure from Congress to help low income and minority homewoners. This, as far asI can tell, you’re saying, is the root cause of a simultaneous recession, a popping real estate bubble, and a credit crunch based on poor risk analysis of assets and massive margin buying of risky assets, much of which is debt being resold and not clearly marked as bad.
Not exactly a compelling, comprehensive argument, since you ignore two of the three factors that are mentioned in the article (notably, “competition” and poor but perhaps inevitable choices by management) and the numerous other issues not mentioned in the article that have nothing to do with Fannie Mae and little to do with mortgages at all (like the triumph of market fundakmentalism and the policy changes that wrought). On the other hand, it does have the merits of implicitly being both racist and classist at once, a pretty offensive thing to trot out at a time like this. But perhaps not surprising given that that’s how pro-rich ideologies have to be sold in electoral democracies (see Atul Kohli) 😉
I’m left at a loss from your explanation at how how a global economy built on mass consumption in wealthy countries functions without rising wages and with increasing inequality and financialization of capital in the United States? In my universe, it’s credit expansion (over decades and at every level) and holding prices low to make up for stagnating or falling wages (for nearly 40 years!). Combined with political influence, it produces deregulation of the financial markets, predatory lending practices, movement of manufacturing to China, Bangladesh, etc. But this regime eventually has to come to an end because it becomes more and more disconnected from the productive economy (i.e. it’s a superbubble) precisely because its so powerful that it can change the rules on which it was supposed to be operating.
Probably not wholly explanatory and there are probably mistakes since I’m not trained in this but it’s at least a starting point to finding a big-picture answer BECAUSE IT TRIES.
14 · Manju said
Heh. Times like this.
44 · Dr Amonymous said
Take yer fancy book learnin’ somewhere else, commie elitist!
6 · Manju said
Good thing big government doesn’t have a monopoly on bureaucratic waste. If that guy was working in an Indian post office you’d be complaining about how public sector corruption is holding the country back.
32 · razib said
That proves nothing.
This just in.
44 · Dr Amonymous said
i don’t think he “reduced” it to government, but rather he said governemt “amplified” the situation b/c of their long held implicit backing of F&F. F&F achieved a size (having a hand–either thru owning or thru their insurance programs–in 1/2 of all US mortgages, meaning they have like 6trillion on the line!!) that would’ve likely been impossible without their various government backing, subsidies, and privileges. F&F bonds traded like they were govt guaranteed so underwriters desperately wanted their backing.
would subprime mortgages, generally considered the trigger to this mess, exist without F&F? sure. But would the problem have achieved the scalability it did w/o them? private companies surely would’ve tried but its doubtful. we probably would’ve seen something like the tech bubble in that case, as vinod argues.
but the problem goes beyond subprime as the housing bubble affects all mortgages (and subsequently all credit). the bubble rocked the loan to value ratios of F&F good mortgages, and their insurance of them ended up to be more leveraged than the most highly leveraged hedge funds (i think this is were the accounting fraud comes into play, but i’m not sure). this is what led the govt to worry about them becoming insolvent.
govt intervention via f and f clearly distorted the market. certainly purely private companies of that size would’ve been considered dangerous, so ones that are government sponsored are even more so. this was crony capitalism, a sort of American license raj. i don’t know what % of the blame they should take, but given that we’re bailing them out to the tune of 200bill, it seems likely to be rather large.
50 · Manju said
Are you all going to crawl into some kind of underground bunker and drink whiskey and gripe under your breath about government regulation and Fannie Mae for the next 30 years? It’s absurd and clearly ideologically motivated to start talking about fannie mae- insultingly so actually. Is everything equivalent to everything else in these conversations? Can I just blame Lehman brothers for having an affirmative action policy and blame the whole thing on them (without even knowing if that’s true or even trying to honestly figure it out?)? Or can I just make some shit up, like a secret conspiracy of goldfish and dolphins that secretly planned the speculative bubble so that global warming would never be solved and they could one day roam the earth?
Yours is the perfect analogy – vinod’s entire argument is looking at the trigger (and that in a ideologically skewed, racist, and classist fashion), but not the bullet, the gun, the hand that pulls it, who got shot, or how the whole thing works in concert and why. Not much of a way to solve a murder mystery.
I’m gonna go watch the market crash now – enjoy your fiddles.