On Tuesday, Neel Kashkari, the former head of Troubled Asset Relief Program (TARP), was named the next president of the Federal Reserve Bank of Minneapolis. Kashkari will assume office in January. His position also grants him a seat on the central most committee in the Federal Reserve system, the Federal Open Market Committee, which directs US monetary policy.
As noted by government watchdog group Little Sis, Kashkari’s appointment means that the last three Federal Reserve appointments are Goldman Sachs alumni and Goldman Sachs alumni now lead four out of the 12 branches of the Federal Reserve.
— LittleSis.org (@twittlesis) November 11, 2015
Can you say Government Sachs?
Previous to his appointment as Assistant Secretary of the Treasury for Financial Stability and overseer of TARP, Kashkari worked at Goldman Sachs as an investment banker. He worked under former CEO Henry Paulson who would later bring Kashkari into government when Paulson became secretary of the treasury.
The TARP program under Kashkari would become highly controversial. According to the book “Too Big To Fail,” Kasharki originally wanted the bank bailout fund to be $1 trillion, but was told by Secretary Paulson to settle for less. Kashkari reduced the amount to $700 billion and said he came up with the number by calculating that the fund should be 5% of the then-outstanding mortgages valued at $14 trillion.
Kashkari’s actions administering the program infuriated many including Senator Elizabeth Warren and the special inspector general for TARP itself. Warren claimed in her book that Kashkari lied to her about the Citigroup bailout and helping smaller banks when she interviewed him in 2008 at the Congressional Oversight Panel for TARP. TARP Special Inspector General Neil Barofsky said Kashkari failed to oversee the payment of bonuses by TARP recipients which let Wall Street bankers take advantage of the program. [PDF]
After leaving the Treasury Department in 2009 Kashkari helped Paulson write his memoirs and then returned to the financial services industry by taking a job as a managing director at investment management firm Pimco. Pimco is a major investor in U.S. treasury bonds and Kashkari will now have some influence over their prices as a Fed president.
In 2013, Kashkari left Pimco to run for governor of California. During the campaign, Kashkari tried to spin his tenure as TARP chief as a success, but voters were unconvinced. Kashkari lost to Governor Jerry Brown by almost 20 points. A resounding defeat.
Despite his unpopularity and questionable public service, Kashkari will now assume a senior position managing the US economy.