Posted on 10/11/2008 9:24:32 AM PDT by Kozman
The new kid at the Treasury hasn't quite learned you really can't talk in public about what you are really up to at Treasury. New Interim Secretary of the Office of Stability, Neel Kashkari, has been caught on tape providing the true details of what Treasury is up to. This will get him muzzled pretty fast, but it provides us the opportunity to see the scheming going on at Treasury... the conference call took place the night before the House rejected the rescue plan on September 28, which passed days later on October 3.
The date is important because Kashkari also reports that, "Our preference would be to try to help healthy banks become even healthier." (My emphasis.)
Remember, the entire focus, at the time, was on buying up bad mortgages and there was no news out publicly about Treasury helping "healthy banks".
Indeed, I just did a search of the New York Times database and the first time the words "healthy bank" come up in a search are on October 9, where NYT reports that as Part of a NEW "Plan B" that Treasury may take positions in banks, even healthy ones...
(Excerpt) Read more at economicpolicyjournal.com ...
Wow. The socialists are universally making their big move.
And both the Dims and the GOP are in the tank with them. We’ve been sold.
Just think, we won’t be able to make fun of the French anymore.
This has been my take all along, but I don't want any credit for prescience because you'd have to be a blind butthead not to see this.
I'll also reiterate my statement that this isn't socialism, but crony capitalism at it's croniest (yes, I just invented a new word).
What would you prefer they do, help the badly run banks?
This is what you do in a banking crisis and it is what J.P. Morgan did to stop the 1907 panic. You figure out which banks can survive and you help them and you figure out which ones are beyond saving and you put them to sleep.
The bad part comes in if there is preferential treatment to specific entities that the administrators have ties to. That only gets sorted out in retrospect, and only sometimes.
Without this program (which I'm not entirely happy about) there would still be bank consolidation, only with more economic disruption during the settling period.
MEET THE ENEMY: NEEL KASHKARI: BORG BASTARD AND PAULSON’S ERRAND BOY
October 10, 2008, 9:34 am
Neel Kashkari: A Portrait of the $700 Billion Man as a Young Banker
Posted by Heidi N. Moore
Who is Neel Kashkari?
We’ll get to that in a second. Here is who he is not: Neel Kashkari is not a wunderkind. He’s not an evil genius. He’s not a mastermind.
Kashkari, the 35-year-old interim head of the Office of Financial Stability, has been the source of great worry. Many fear he’s too young and too inexperienced to handle the task of rebuilding the nation’s financial system.
Getty Images
Of course, Kashkari may just have the job for a few months. Paulson made clear he will appoint somebody and try to get the new person confirmed in November, and that person would transition into the next administration.
Forty-five days isn’t a long period in normal times, but in this crisis it’s an age. To get a better understanding of him, Deal Journal spoke to people who knew Kashkari well in his childhood and during his time at Goldman Sachs to find out the character and working style of the man who is managing the nation’s bailout.
Here’s the portrait that emerged: Kashkari is smart, dutiful, detail-oriented, and takes orders well. In the parlance of investment banking, he is a good “execution guy”: He leaves strategy to the bigwigs. But if you give him a project, he will prioritize, delegate and finish it.
These people report he has an amiable manner and is a good, intent listener. He doesn’t make waves and never dominates a discussion; he thinks before he speaks and he lets people express themselves. He is particularly good at presenting complicated ideas and leading team projects that depend on gaining cooperation from others. Those include the Sunrayce project to build a solar car as well as his work on the space telescope. “Neel is just plain good, with a high standard of ethics,” said Dr. Surinder Bhardwaj, a Hindu community priest who is a close family friend to the Kashkaris in Ohio. “This is a responsibility that requires the interest of the nation as a whole, and requires a very strong base of morality, which he has.”
Kashkari comes from a small, tight-knit community of Indian Hindus in Ohio, where his parents had a high profile in the local community. His mother, a pathologist, was known as a community resource. “She’s a good listener and helps guide people out of stressful situations,” said Dr. Bhardwaj. “They are very compassionate people, his parents, and maybe that’s where he’s getting his value system from.” Kashkari’s father is a retired engineer with a bent to public service, particularly in West Africa, where he spearheaded efforts to bring electricity and clean water to poor villages. Kashkari met his wife, Minal, in college at the University of Illinois Urbana-Champaign. They were married in a traditional Indian ceremony in Chicago where participants remember the bride being carried in on a festive palanquin and Kashkari, busy even then, taking the time to put each guest at ease.
Kashkari first worked at Goldman Sachs during the summer between his two years at Wharton, and impressed well enough to get a full time job after graduation. Academically, Kashkari was not outstanding, said a person familiar with the matter, but he appealed to Goldman’s recruiters because, as a former engineer, he was different than the usual aspiring investment banker. Kashkari’s head – shaved bald even then – also differentiated him from the reigning Goldman aesthetic, sometimes mockingly referred to as “The Borg” by rivals. “Everyone at Goldman has a full head of hair and went to prep school and Dartmouth and played lacrosse. That’s not Neel,” said an investment banker who knew him.
Goldman’s investment bankers were most impressed by Kashkari’s science background. His experience working on the James Webb Space Telescope for NASA contractor TRW gave him a comfort with technological jargon that would help Kashkari communicate with technology-company executives. Kashkari also spoke passionately of his entry in a car competition, the 1997 Sunrayce event in which Kashkari’s team built and raced a solar-powered car. His team didn’t win, but it did earn kudos. While other bankers at Goldman would often discuss their project du jour or details of a presentation even in their off-time, Kashkari often discussed cars and the Sunrayce experience.
When Kashkari returned to Goldman Sachs after business school, he worked with senior bankers advising companies in the software sector. As a junior banker, he did not have many responsibilities of his own; it was his job to prioritize and execute on the tasks given to him by others. (In many ways, that has also been Kashkari’s job at Treasury, where the strategy has been set by Hank Paulson.)
Kashkari did well enough that his bosses gave him an obscure sector to research and cover : information technology software, which included antivirus-program makers. The sector included many tiny companies that rarely hired or needed investment bankers, and Goldman Sachs did not have meaningful relationships with the leading companies. Kashkari impressed colleagues with his technical skill. Much of his job, however, was building relationships, a task that, in the world of investment banking, takes years. Although a few mergers and financings emerged from his work, many were not publicly disclosed because of their small size.
After Kashkari had spent only a couple of years covering IT software, the head of Goldman Sachs’s technology group, George Lee, recommended him to Paulson, who had then moved to Treasury.
“I never thought I’d see him in government,” said one banker who knew him. “He enjoyed being a banker and the respect that was conferred on him as being a Goldman banker.”
The rest, as they say, is history.
> US needs bank consolidation.
Just so I understand correctly, you’re saying what we need is /more/ banks that are “too big to fail” as opposed to better risk management and less underwriting fraud by places like AIG?
I wouldn't put it that way. We need more banks like JP Morgan who appear to know what they're doing, and less banks either playing "follow the leader" where the leader is Moody's or S&P ratings. Nothing will help at all times if people are going to go naked a la AIG and Lehman by making huge insurance bets they can't make good on.
Reasonable leverage rules would help, too. When everybody's doing it there's no market discipline.
We've got thousands of banks, which is an unregulatable situation until after they've gone under because you can't track what they are doing.
I could point to Switzerland, where there's a few large banks that are mostly doing well except for the ones that got too Americanized, or even Canada, which seems to have dodged the banking bullet. You'll probably say I should mention England, but oops on them. Size alone isn't going to make everything better.
As you've said "better risk management" is the key. I'd be interested in discussing further how you think it can be imposed.
>We’ve been sold.<
Please don’t tell me that you just realized it.
No: this was just another signpost on our way to the abyss.
So the government's priorities should be
But it will soon be back to business as usual for most of us! And the stock market will recover, probably more vigorously than anyone expects.
I don't see the logic in committing a trillion dollars of tax payers' funds to bail out a small number of greedy people who took advantage of the politically correct Community Organizer's approach to real estate finance.
The economic disruption of flooding massive federal money into the system will prolong the problem and make it worse. It is an inefficient allocation of resources. It is throwing good money after bad. It’s intended primary effect is to insulate bad managers from the consequences of their bad management and make sure that they all get paid. The rest of us will be doing the paying, especially with the inflation tax as the money we hold becomes ever more worthless. Its primary real effect is inflation. We are looking at Weimar.
Sounds bad to me. Like they are giving up on the weaker banks and just trying to save a few of the stronger banks.
have you considered asking WHY the weak banks are weak?
were the weak banks the ones coluding to inflate home values in order to have larger morgage notes to bundle and sell on the markets?
were the weak banks spending more money on lobbyists rather than depositors?
were the weak banks issuing credit cards like candy to high risk people?
how much is this maniputation?
it seems the irrational panic
(with the rational painic against Obama Taxes)
is being used as cover to do damage to the USA.
Maybe the weak banks brought their problems on themselves, but their collapse will take any number of sound banks that did not take part in the shady practices with them. In the end, all will suffer. IMO this thing is too big to be explained entirely by bad loans, etc.
I doubt that.
those banks that were steady and prudent are actually just fine.
I remember in the safe loan days it was 10% down
20% was for self employed people who used their corporation(s) to legaly avoid (legally) taxation.
I hope you are right.
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