Monday, June 30, 2014

India Close to Rs. 100,000 Crore Deal With France for Fighter Jets: Sources

French Foreign Minister Laurent Fabius has landed in the capital to, among other issues, close a stalled deal to sell India 126 Rafale fighter jets, built by Dassault Aviation, for an estimated $15-17 billion or Rs. 100,000 crores. 

The French minister will meet Prime Minister Narendra Modi and Arun Jaitley, who holds the twin portfolios of Defence and Finance. Sources tell NDTV that India has closed most of the technical negotiations with the French manufacturer over the deal. And now the government has to decide whether to go ahead with committing to the Rs. 100,000-crore contract, with a plan to spend the money over a decade. 
Three technical committees have signed off on how transfer of technology and maintenance of the combat jets should be handled in the contract. A fourth committee that is looking at the overall costs needs the green-light from the government. 
The defence minister has been briefed by the Air Force about the urgent need for fighter jets. Currently, the Air Force has 32 squadrons; a minimum of 39 are sought by top officers. 
As the government prepares to open the nascent defence industry to foreign investment, Western governments are rushing to visit the PM. 

In the second week of July, Britain is likely to send in Foreign Secretary William Hague and Finance Minister George Osborne, a British government source said on Friday.

Britain has drawn some cheer from the slow progress of the negotiations for the Rafale deal. The Eurofighter Typhoon was shortlisted along with the Dassault fighter before India announced the French jet was the winner.

Cost escalations and disagreements about building the Rafale in partnership with India's state-run Hindustan Aeronautics Limited have complicated talks with France, and London has never entirely given up hope that it will return to the race.

India spent some $6 billion last year on weapons imports. It makes few of its own weapons, beyond ballistic missiles and assembly lines for foreign jets. 

On Thursday, the government signalled it was in the mood for liberalisation by allowing manufacturers to build more defence components without licences, making it easier for Indian firms to partner with foreigners.

At present, foreign companies can only invest 26 per cent in Indian defence projects without committing to technology transfer, which has put off many investors.

AK Antony, who was India's longest serving defence minister until his Congress party's election defeat in May, said this week that allowing higher foreign investment in defence would be "suicidal".

India's Department of Industrial Policy and Promotion has circulated a discussion document that proposes allowing up to 100 per cent foreign direct investment, or FDI, in defence production, say government sources.

The note suggested allowing 100 per cent FDI in manufacturing of state-of-the art equipment, an official said. It also recommends a cap of 49 per cent for investments which do not involve transfer technology and a 74 per cent ceiling in such cases where the foreign investor is ready to share technology know-how, the official added. 

Sunday, June 29, 2014

Eyes on Defence Deals, Western Powers Court PM Narendra Modi

Western governments are rushing to visit Prime Minister Narendra Modi, drawn by the prospect of multi-billion-dollar deals as the Indian government prepares to open the nascent defence industry to foreign investment.

Senior politicians from France, the United States and Britain arrive in quick succession over the next 10 days as Prime Minister Modi prepares to accelerate the modernisation of the country's mostly Soviet-era weaponry.

The PM intends to build up the India's military capabilities and gradually turn the world's largest arms importer into a heavyweight manufacturer - a goal that has eluded every prime minister since independence in 1947.

On the table is a proposal circulated within the new government to raise caps on foreign investment - with one option to allow complete foreign ownership of some defence projects.

"All the countries are trying to make their case, especially as there is the sense that the Indian market will undergo a shift," said Harsh Pant, professor of international relations at King's College London.

"They get a sense from their dealings that something dramatic is going to happen and they want first-mover advantage," said Pant, who specialises in defence.

First to arrive in New Delhi will be French Foreign Minister Laurent Fabius, whose top priority is to close a stalled deal to sell India 126 Rafale fighter jets, built by Dassault Aviation, for an estimated $15 billion.

Fabius, who arrives on Monday, will meet PM Modi as well as Defence Minister Arun Jaitley who also holds the finance portfolio - and can therefore decide both whether to sign the deal and when to release the money.

US Senator John McCain is also due in India next week. Mr McCain, whose Arizona constituency includes weapons makers such as Boeing and Raytheon, told the Senate on Thursday that Washington should seek to bolster New Delhi's economic and military rise.

"This is an area where US defence capabilities, technologies, and cooperation - especially between our defence industries - can benefit India enormously," McCain said of India's drive to modernise the armed forces.


In the second week of July, Britain is likely to send in Foreign Secretary William Hague and finance minister George Osborne, a British government source said on Friday.

Britain has drawn some cheer from the slow progress of the negotiations for the Rafale deal. The Eurofighter Typhoon was shortlisted along with the Dassault fighter before India announced the French jet was the winner.

Cost escalations and disagreements about building the Rafale in partnership with the state-owned Hindustan Aeronautics Limited have complicated New Delhi's talks with France, and London has never entirely given up hope that it will return to the race.

However, on Thursday, one source at India's defence ministry said the deal was likely to be finally closed during Fabius' visit and could be signed this year. A French foreign ministry source said talks were ongoing, but refused to provide more detail. (India's Rafale Fighter Jet Deal in Final Lap, Awaits Government's Nod)

Russia, for years India's top weapons supplier, pipped all three countries to the post, sending Deputy Prime Minister Dmitry Rogozin to visit the new government in Delhi two weeks ago. Washington last year replaced Moscow as India's top defence supplier, according to IHS Jane's. 

The Western nations will have noted that External Affairs Minister Sushma Swaraj expressed displeasure with Russia's recent offer to sell Mi-35 attack helicopters to arch-rival Pakistan.

"I don't think it's a competition," US Assistant Secretary of State Nisha Biswal said after an early post-election visit to New Delhi.

"India will have strong and positive relationships with a variety of countries and that is to be encouraged," said Biswal. "We want to see India taking on a stronger and a leadership role in the region and around the world so we welcome that."


India spent some $6 billion (approximately Rs. 36,000 crore) last year on weapons imports. It makes few of its own weapons, beyond ballistic missiles and assembly lines for foreign jets. 

On Thursday, the government signalled it was in the mood for liberalisation by allowing manufacturers to build more defence components without licences, making it easier for domestic firms to partner foreigners.

At present, foreign companies can only invest 26 percent in Indian defence projects without committing to technology transfer, which has put off many investors.

Before the election, sources in PM Modi's Bharatiya Janata Party (BJP) said there was a plan to increase the cap to 49 percent.

"For higher-tech intellectual property we would want to go over 50 percent to be in a position to share technology that we have significant investments in," said Phil Shaw, chief executive of Lockheed Martin India Pvt Ltd.

"An uplift from 26 to 49 percent maintains the status quo and may not be sufficient incentive to make an investment here."

Lockheed Martin already has a 26 percent investment in an Indian joint venture with Tata Advanced Systems that manufactures airframe components for the C-130J Super Hercules cargo lifter.

India's Department of Industrial Policy and Promotion has circulated a discussion document that proposes allowing up to 100 percent foreign direct investment, or FDI, in defence production, two government officials told Reuters.

The note suggested allowing 100 percent FDI in manufacturing of state-of-the art equipment, one of the officials said. It also recommends a cap of 49 percent for investments which do not involve transfer technology and a 74 percent ceiling in such cases where the foreign investor is ready to share technology know-how, the official added. 

Last week, Commerce and Industry Minister Nirmala Sitharaman said foreign investment in the sector would help increase defence preparedness of the country and reduce import dependence, saving billions of dollars in foreign exchange.

However, she said the government was yet to take a final call on increasing the FDI ceiling and the decision would be taken by Mr Jaitley and PM Modi. The proposals face pockets of resistance in the Indian industry, Mr Modi's party and the military establishment.

AK Antony, who was the country's longest serving defence minister until his Congress party's election defeat in May, said this week that allowing higher foreign investment in defence would be "suicidal".

Sunday, June 22, 2014

India Can Export Fighter Planes, Missiles, Says DRDO Chief

 With Prime Minister Narendra Modi stressing on the need for increasing arms exports, the Defence Research and Development Organisation (DRDO) has said India can sell combat aircraft and missiles whose production cost would be "much lower" than some of the weapons sold by countries such as China.

DRDO chief Avinash Chander said that the country needs a "policy mechanism" for exporting weapon systems and the defence research agency has suggested a "single window clearance" for sale of arms to friendly foreign countries in a time-bound manner.

"We have a list of equipment that includes the Light Combat Aircraft 'Tejas', 'Akash' air defence system, 'Prahar' class of missiles and 'BrahMos' supersonic cruise missiles along with a number of systems that can be exported," he said.

"We are discussing the methodology for developing the export potential as well as a policy mechanism for export of weapon systems," Mr Chander said.

Tejas is a lightweight, multi-role, single-engine tactical fighter aircraft. Akash, a surface-to-air missile, has a range of 25 km.

Prahar is a 150 km-range tactical missile system while BrahMos is a supersonic cruise missile with a strike range of 290 km.

Asked about the cost-benefit for countries procuring arms from India, Mr Chander said, "Many times Indian weapons are a lot cheaper.

"There are various other systems, like if you take strategic missiles, the long-range missiles that China sells to Saudi Arabia and the cost at which we produce, it would be one-third or one-fourth," he said.

Mr Chander said, "We can talk only about the price at which people sell and what comes out in published figures about the contracts of the day. By that, our production cost would be much lower. What will be the export cost, that will be the policy decision of the government."

He said for getting into the business of arms exports, the country "needs a framework on what can be exported. It depends on which country, how to protect misuse".

He said there are always a number of issues related to arms exports which need to be addressed.

"What we are suggesting is that there should be a single window clearance system for export of weapons in a timebound manner," the DRDO chief said.

He said several countries have shown interest in the Akash missile system, which was ready to be inducted into the Army.

Mr Chander also said there was a scope for exporting 500-1,000 "cost competitive" indigenously developed LCA Tejas combat aircraft.

LCA is likely to be ready for induction into IAF by the end of this year after attaining the Final Operational Clearance (FOC).

India depends on imports for meeting more than 65 per cent of its weapons requirement and has been branded as largest importer of arms by international think tanks.

So far, India has exported only assault rifles, a few helicopters along with some small naval vessels to friendly foreign countries.

Friday, June 20, 2014

Why Indians are Buying London Properties

Mumbai-based Indiabulls Real Estate on Thursday bought a Rs. 1,550-crore property in London's upmarket Mayfair area. Indiabulls' investment in London is the third largest transaction by a domestic realtor in the last six months.

In February 2014, Indiabulls' rival Lodha Developers had bought a prime London property at £90 million. In November 2013, Lodha had bought Canada's embassy building in London for Rs. 3,300 crore. (Read the full story here)

Indiabulls, which will finance the purchase from internal accruals, wants to convert its London acquisition into a luxury residential property. The London transaction is nearly 40 per cent of Indiabulls Real Estate's market capitalization.

The company is part of Indiabulls Group and is developing over 24 million sq. foot of projects currently.

Gagan Banga, CEO of Indiabulls said the company plans to steadily build a portfolio of projects in London.

The latest transaction indicates the growing interest of Indian developers in global properties amid a sharp slowdown in the domestic property market.

India's stock markets have rallied to record highs on hopes that the new government will bring the economy back on tracks, but the optimism has not percolated to real estate transactions.

Interest rates continue to be high and property prices have not corrected despite increasing inventory of unsold flats, analysts say.

Shares in the company closed 0.65 per cent higher at Rs. 92.75 and outperformed the BSE Realty sub-index, which rose 0.5 per cent.

Mumbai-based real estate developer Lodha Group said on Friday it has bought Canada's embassy building in London's prime Mayfair district for around $530 million (or around Rs. 3,300 crore at 62 rupee per US dollar).

The seven-storey Canadian High Commission in Grosvenor Square, known as Macdonald House, will be converted into luxury residences for the super-rich, Indian media said.

"We will create a world-class development, which befits the status of the address," said Abhishek Lodha, managing director of Lodha Group.

The Lodha group was chosen as the buyer of the property by the Canadian government after a competitive bidding involving global developers and sovereign wealth funds, the Lodha Group said.

The Indian firm is buying the property through internal funds and does not plan to raise debt to finance the deal, officials said.

In 2010, India's Sahara group had acquired the Grosvenor House hotel in London for around $750 million (or nearly Rs. 4,650 crore) from the Royal Bank of Scotland.

In December last year, the Lodha Group bought the US Consulate's Washington House property in Mumbai for $54 million (nearly Rs. 34 crore).

The Lodha Group is building what it claims is the world's tallest purely residential tower in Mumbai, called "World One", set to be completed in 2014.

Black Money Stashed Abroad Seen at over $2 Trillion greater than Indian GDP: Assocham

A study by industry body Assocham says nearly $2 trillion or Rs. 120 lakh crore of Indian black money is stashed overseas. Assocham's black money estimate is more than the country's nominal GDP, which stood at Rs. 114 lakh crore or $1.9 trillion in 2013-14.
So far, there is no official estimated of black money in India though the issue has attracted a lot of attention in the recent past. Assocham's estimate is higher than various earlier estimates, which have pegged the quantum of black money between $ 500 billion to $ 1.4 trillion.
A study commissioned by the UPA government in March 2011 to assess the quantum of black money stashed in India and abroad is yet to be completed. The study was expected to be completed within 18 months. 
On his very first day in office, the new government headed by Prime Minister Narendra Modi constituted a Special Investigation Team or SIT to unearth and bring back black money stashed away abroad. Assocham said it will submit its proposals to the newly-constituted SIT.
Ved Jain, chairman of direct taxes council at Assocham, said the new government should come out with a six-month amnesty scheme to will facilitate transfer of black money after payment of 40 per cent tax.
In the United States, more than 14,700 tax payers took advantages of such a scheme, Assocham said. A similar move in Germany saw 20,000 taxpayers make a voluntary disclosure leading to 4 billion Euros in additional revenues for the German government, it noted.
The industry body also called for uniform stamp duty rates across the country to curb under reporting of property prices. Other experts also agree that high stamp duty is one of the big reasons for the sharp rise in black money in real estate transactions.
According to Maadhav Poddar of EY cascading effect of stamp duty has been a major reason for non-registration of deals and for alternate conveyance options leading to creation of black money.
"Introduction of uniform stamp duty rates and stamp duty credit will reduce costs for ultimate buyers and foster transparent deals," he said.
Circle rates, or the minimum rate for selling properties, should be notified every year to make them as good as the prevalent market rate, Assocham noted.
Many Indians working abroad use illegal and parallel transactions to send money home, Assocham noted. Besides, the recent restrictions on gold import have also led to increase in smuggling and black money, the industry body noted.
Assocham also called for transparency in political funding to remove the menace of black money.

Saturday, June 14, 2014

Why you really want India to join the US and China as a superpower

Iraq joined Syria in civil war and Ukraine’s crisis persisted this week. And yet let me argue that this week’s most important geopolitical news is the economic program of India’s new prime minister, Narendra Modi.

Any increase in the chances for a full-scale supply-side transformation of India’s economy is reason to cheer for many reasons. First and foremost, faster economic growth in India would lift hundreds of millions of people out of dire poverty. But its geopolitical significance should not be underestimated. India is the only nation that rivals China in its population–and is on track to surpass China’s population. As I wrote in a previous Quartz piece, “Benjamin Franklin’s strategy to make the US a superpower worked once, why not try it again?”:

The reason China’s economic rise matters for US grand strategy is that China has a much larger population than the United States. … if China has 1/4 the per capita GDP, but four times as many people, its total GDP will be the same size. …  Power corrupts. So … it should surprise no one that the US has done some bad things as a superpower. Yet I am convinced that the combination of Chinese nationalism and “Communist” oligarchy—or the combination of Chinese nationalism with some tumultuous future political transition in China—would lead a dominant China to behave much worse than the US has.
I believe a future in which India joins China and the US as a superpower would be a safer world than one in which China and the United States are the only superpowers. News of Chinese saber-rattling over territorial disputes has become a commonplace in the last few years. Here is a recent example. And the 25th anniversary of the Tiananmen Square Massacre is a reminder of the ugliness of China’s politics now and the tough road China has ahead even in the best-case scenario in which it does become more democratic.

Narendra Modi’s own past is a reminder that India has its own political ugliness. He is the only person to ever have been denied a US visa based on a law designed to punish foreign officials for “severe violations of religious freedom,” since as the head of the Indian state of Gujarat, he failed to stop a Hindu vs. Muslim riot that left more than 1,000 people dead.

Yet, India has been a functioning democracy since 1950, with genuine handoffs of power between different political parties since 1977. And both the religious tensions Modi fatally mishandled and the welfare state he now challenges point to the orientation of Indian politics primarily toward domestic issues, rather than territorial disputes with neighboring countries. What ideological gap exists between the Indian electorate and the US electorate would be narrowed further if further economic liberalization in India is successful. So I do not worry about what India might do as a future superpower the way I worry about what China might do.

What does India’s new government plan to do to make the Indian economy as big as possible, as fast as possible? One key element of the policy address by India’s president Pranab Mukherjee earlier this week, reflecting the prime minister’s agenda, is to make making agricultural markets more competitive, so that farmers can get a better price for their crops. The Wall Street Journal explains:

Subsidies and make-work schemes discourage farmers from concentrating on maximizing yields. Under the Agriculture Produce Marketing Committee Act, they are required to sell produce to monopolistic middlemen. As a result, much of India’s harvest rots before it gets to consumers, further driving up food prices.
The policy address outlines the rest of Modi’s agenda:

  1. “Minimum government, maximum governance;”
  2. “basic infrastructure such as roads, shelter, power and drinking water” in rural areas;
  3. helping farmers to farm better in order to raise yields;
  4. pursuing irrigation projects;
  5. more use of massively open online courses (MOOCs) for education with the most bang for the buck;
  6. toilets for everyone;
  7. garbage collection;
  8. making sure girls receive an education and are protected from violence;
  9. encouraging groups of states within India to cooperate on economic development;
  10. combating corruption with “transparent systems and timebound delivery of government services;”
  11. trying to eliminate “obsolete laws, regulations, administrative structures and practices;”
  12. digitization of government records;
  13. “Wi-Fi zones in critical public areas” and broad-band in every village;
  14. social media as a way of getting feedback about how government is doing;
  15. “rationalisation and simplification of the tax regime to make it non-adversarial and conducive to investment, enterprise and growth” including reducing taxation of saving and investment by shifting toward a value added tax;
  16. reducing red tape to “enhance the ease of doing business;”
  17. providing workers with “access to modern financial services;”
  18. creating “dedicated freight corridors and industrial corridors” as attractive destinations for investment;
  19. more airports and upgraded seaports;
  20. 100 newly developed cities;
  21. allowing more foreign investment in making military equipment to make this sector more efficient.
There is always a big gap between government promises and government performance. But this list of initiatives is remarkable for what it doesn’t emphasize. There is not much in the way of direct handouts. By contrast, I learned at a“Cashless Society” workshop, sponsored by New York University’s Urbanization Project, that under the previous Indian government, when government officials came to take the biometric measurements to make it possible to establish identitywithout needing an identity card, people were happy to cooperate because they see government officials coming to town as a sign that some new handout, subsidy, or goody is on the way.

Most of the things Modi’s government is promising are things that, if delivered, will foster the quantity and quality of private economic activity. To give just two examples, more toilets would not only reduce the number of girls who get raped while going out to the fields to relieve themselves, it would save those girls a lot of time every day that they could devote to their schoolwork. And pushing the educational system heavily in the direction of massively open online courses could speed India toward the kind of low-cost, effective education that ace management guru Clay Christensen and his coauthors predict is the future of education everywhere in the world.

The policy address by the new Indian government is also relatively sophisticated in realizing the obstacles to rolling out new policies. It recognizes that, as a practical matter, many things that need to be done for economic development need to be done at the level of Indian states or groups of Indian states, rather than at the national level. If some states are more willing to work with the national government to foster economic development than others, those states can move ahead faster, and hopefully at some point, citizens of the remaining states will insist on policies like the successful policies of neighboring states.

In a previous election, Modi’s Bharatiya Janata Party (BJP) began using the slogan “India Shining.” If the new Indian government is able to implement even half of its policy agenda, and subsequent Indian governments continue to push further along the road of supply-side improvement, it won’t be long before “India Shining” is no longer just a slogan. It will be an accurate description of the world’s newest superpower.

Friday, June 13, 2014

Neel Kashkari the Republican challenger to the governor of California

Neel Tushar Kashkari[1] (born July 30, 1973) is an Americanbanker and politician. As interim Assistant Secretary of the Treasury for Financial Stability from October 2008 to May 2009, he was responsible for overseeing the Troubled Asset Relief Program(TARP) that was a major component of the U.S. government's response to the financial crisis of 2007–08. A Republican, he is running for Governor of California in the 2014 election.
Born and raised in Ohio and educated at the University of Illinois at Urbana–Champaign, Kashkari worked initially as an aerospace engineer. After attending business school at the Wharton School of the University of Pennsylvania, he became an investment banker, covering the information technology security sector for Goldman Sachs.
When Henry Paulson, the former head of Goldman, was appointedSecretary of the Treasury in 2006, he brought Kashkari on as an aide. Kashkari was eventually named Assistant Secretary of the Treasury for International Economics and Development. At Treasury he played a number of roles in the response to the financial crisis and the subprime mortgage crisis that preceded it, most notably administering TARP.
Kashkari left government in May 2009 and began working forPimco later that year, leading that company's push into theequities market. In January 2013 he resigned from Pimco to explore a run for public office. In January 2014, he announced his candidacy for Governor of California. On June 3, 2014, he came in second in California's open primary, placing him on the general election ballot in November against incumbent governor Jerry Brown.
In May 2006 President George W. Bush announced his intention to appoint Paulson asSecretary of the Treasury.[17] Kashkari contacted Paulson and asked to join him at Treasury. Despite not knowing Kashkari well,[18] Paulson had him flown to Washington, D.C., and offered him a job as a policy generalist shortly after Kashkari had begun his pitch. Kashkari accepted, and then Paulson remembered to confirm that Kashkari was a Republican.[19] After the U.S. Senate confirmed Paulson, he and Kashkari started at Treasury on the same day.[18] Several other Goldman employees followed Paulson to Treasury, among them Robert K. Steel.[20]
Kashkari began as a special assistant to Paulson working on energy policy. He and Allan B. Hubbard developed Bush's "Twenty in Ten" plan to promote energy conservation.[21] He also worked on issues related toIndia, particularly infrastructure development.[16] In November 2007, Bush nominated Kashkari to be Assistant Secretary of the Treasury for International Economics and Development. The U.S. Senate confirmed the nomination in June 2008, and Kashkari was sworn in the following month.[22]

A growing crisis

Beginning in summer 2007, the value of some financial instruments backed by U.S. subprime mortgages declined sharply as it became clear that many of the borrowers would default on the mortgages. This caused a crisis as the banks holding the mortgages saw their assets decline in value and rushed to foreclose the loans. This ultimately intensified into a global financial crisis with broad implications.[23]
Kashkari played important roles in several episodes of the crisis. He led Treasury's participation in the Hope Now Alliance, a mortgage industry initiative coordinated by the federal government in October 2007 that aimed to reduce foreclosures by modifying loan terms on a loan-by-loan basis.[21][24] In March 2008 he represented Treasury at negotiations that led ultimately to the federally sponsored takeover and rescue of the investment bank Bear Stearns by JPMorgan Chase.[25] He was in charge of Treasury's efforts to create a market in the U.S. for covered bonds, whose value would continue to be guaranteed by the issuing bank after the bank had sold them.[22][26] He also worked closely with Paulson on Treasury's takeover of thegovernment sponsored enterprises Fannie Mae and Freddie Mac on Septempber 6, 2008, and the federal bailout ofAmerican International Group on September 16.[7]
In March 2008 Kashkari began to worry that, if the Bush administration never received the authority it needed to deal with the growing crisis, the next administration would blame them for everything wrong in the economy. Paulson scoffed at this idea, particularly Kashkari's speculation that Barack Obama, then a candidate in that year's presidential election, would win the presidency and use the crisis to ride to popularity just as former President Ronald Reagan had following the Iran hostage crisis.[27]


In early 2008, Paulson directed Kashkari and fellow Treasury aide Phillip Swagel to write a plan to recapitalize the banking system in case the crisis worsened.[28] The plan called for Congress to authorize Treasury to spend $500 billion to buy mortgage-backed securities from troubled banks, replacing them on banks' balance sheets with safe, liquid Treasury bills. This would prevent runs on the banks and encourage them to lend. The plan was conceived as an alternative to proposals from the staff of the House Financial Services Committee, then led by Democratic Representative Barney Frank.[29]
Following the collapse of the investment bank Lehman Brothers on September 15, 2008, the Emergency Economic Stabilization Act of 2008 (EESA) was enacted on October 3. Kashkari was one of several Paulson aides who was heavily involved in the crafting the legislation.[30] Based in large part on Kashkari and Swagel's recapitalization plan, the act created the Troubled Asset Relief Program (TARP), a $700 billion bailout fund for financial institutions threatened with collapse.[31]Kashkari favored getting distressed assets away from the banks the most among Treasury staff.[32] He initially proposed a $1 trillion fund, but Paulson vetoed that number as too large. Kashkari came up with the lesser figure of $700 billion by taking 5% of the $14 trillion in then-outstanding mortgages in the United States.[33]
To administer TARP, the EESA created within the Treasury Department a new Office of Financial Stability to be headed by anAssistant Secretary of the Treasury for Financial Stability to be nominated by the President and confirmed by the Senate. However, it also specified that the Treasury Secretary could designate an interim Assistant Secretary to run the office. Kashkari first came to widespread public attention on October 6, when Paulson named him to this position,[34] earning Kashkari the nicknames "bailout czar"[4][10][12] and "the $700 billion man".[2][6][8][21] During his time running TARP he retained his title as Assistant Secretary for International Economics and Development, but his international affairs responsibilities were delegated to another Treasury official.[16]
The program underwent some change after its creation. On October 13, Kashkari announced in a speech that TARP would not only purchase distressed mortgage assets from banks, as had been announced already, but would also purchase stock in the banks themselves.[25][35] Noticing a lack of necessary expertise in investment within Treasury, Kashkari recruited new staff for the program, some from government and others from industry, ultimately hiring about 100 people by January 2009.[18][36][37] Kashkari also chaired the five-member investment committee within Treasury that decided which banks would receive TARP money.[38]
Elizabeth Warren in A Fighting Chance, called out Kashkari for misleading the “Congressional Oversight Panel … COP, which was assigned the task of monitoring how Treasury handled out the bailout money.” “[Kashkari] was very clear on one point: The big cash injections were done, and Treasury would now concentrate on getting assistance to smaller banks. … Less than forty-eight hours later, the news broke that Treasury had just made a huge new commitment to Citibank.”[39]
With Bush scheduled to leave office on January 20, 2009, following the November 2008 election, Kashkari's appointment was initially viewed as temporary. There were even plans to replace him before Bush left office.[40] However, after Obama won the election, his transition team asked Kashkari to remain at Treasury after the inauguration for a limited period.[41] He left the Treasury Department on May 1, 2009, replaced at the helm of TARP by Herbert M. Allison.[42]
During his time heading TARP, Kashkari was frequently called to testify before Congressional oversight panels. The House members would often question him hostilely over the politically unpopular program, but at least one, Representative Dennis Kucinich, assured Kashkari privately that he thought Kashkari was doing a great job.[18] Another public critic, RepresentativeGregory Meeks, later thanked Kashkari for his service.[31] Kashkari also won praise from Paulson and Timothy Geithner, Paulson's successor as Treasury Secretary and Kashkari's boss under the Obama administration.[18] Neil Barofsky, who oversaw TARP within Treasury as a special inspector general, commended Kashkari's commitment to the job but criticized his actions.[43] Kashkari later said that Bush not running for reelection allowed the government to "do things that were deeply unpopular but we knew were the right thing."[44]
One week after his resignation, he and his wife moved to a cabin in rural Northern California near Lake Tahoe as part of what he called a "detox" from Washington. He worked on home improvement projects and helped Paulson write a memoir.[31]
In December 2009 Kashkari was named a managing director at the investment firm Pimco, in charge of new investment initiatives.[45] Pimco, which had traditionally focused on bonds, hired him to broaden its focus into equities;[46] Pimco later named him global head of equities.[47] Kashkari had met Bill Gross, Pimco's co-founder, in December 2007 as part of his work at Treasury. Kashkari's move to Pimco attracted attention because Pimco benefited from the government takeover of Fannie Mae and Freddie Mac, though it did not receive TARP funds.[42] Pimco cited Kashkari's expertise in a confidential presentation encouraging investment in a new fund of distressed mortgage bonds.[48] The six equity mutual funds Pimco launched under Kashkari all underperformed benchmarks in 2012; Kashkari attributed this to the funds hedging risk, which decreases returns when stock prices increase.[49]
Kashkari resigned from Pimco in January 2013, citing a desire to return to public service. He was expected to announce a campaign for elected office.[49][50]
Kashkari says he first considered running for Governor of California after Republican nominee Mitt Romney lost the 2012 presidential election to Obama.[51] He spent the year after his resignation from Pimco preparing to campaign in the 2014 gubernatorial election, touring the state, hiring a staff, and meeting with potential donors. He announced his candidacy on January 21, 2014, citing jobs and education as his top priorities. It is his first run for elected office. In the 3 June 2014 primary, He faced incumbent Governor Jerry Brown, a DemocratTim Donnelly, a Republican Assemblyman; and several other candidates. Kashkari finished second to Brown and the two will face each other for the Governorship in the November elections.[52] Brown is considered the favorite in the race.[53][54][55][56]
In March 2014 Kashkari announced a plan to create jobs in California if elected. The centerpiece is a proposal to waive income taxes for 10 years for businesses that move to California or build new manufacturing plants there. The plan also calls for expanding hydraulic fracturing of oil deposits, relaxing environmental regulations, and increasing water storage in response to the state's ongoing drought. Economists and political experts interviewed by the Los Angeles Times were skeptical of the plan's chances in the Democratic-dominated California Legislature and of its potential effectiveness were it to be passed.[57]
A March 2014 poll by the Public Policy Institute of California found that 2% of voters supported Kashkari, compared with 47% for Brown and 10% for Donnelly.[58] In an interview with BuzzFeed, Kashkari acknowledged that Brown will likely come in first place in the nonpartisan blanket primary preceding the general election. He cited George W. Bush's upset victory overAnn Richards in the 1994 election for Governor of Texas as a reason for hope.[59] Donnelly was better received at theCalifornia Republican Party convention in March 2014.[60]
The San Francisco Chronicle reported in January 2014 that, since 1998, Kashkari had been eligible to vote in 23 elections in California and Pennsylvania but had only voted in 13 of them. His campaign disputed some aspects of the reporting and said that Kashkari's Treasury Department service proves his commitment to civic life.[61] Kashkari later acknowledged his imperfect voting record.[62]
Kashkari raised nearly $1 million in campaign donations within two weeks of announcing his candidacy. This was more money than Donnelly raised in the previous year of campaigning but well short of the $17 million Brown raised before even declaring his candidacy.[63]