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Friday, June 13, 2014
Neel Kashkari the Republican challenger to the governor of California
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 PresidentGeorge W. Bush announced his intention to appoint Paulson asSecretary of the Treasury. Kashkari contacted Paulson and asked to join him at Treasury. Despite not knowing Kashkari well, 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. After the U.S. Senate confirmed Paulson, he and Kashkari started at Treasury on the same day. Several other Goldman employees followed Paulson to Treasury, among them Robert K. Steel.
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. He also worked on issues related toIndia, particularly infrastructure development. 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.
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. 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. 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. He also worked closely with Paulson on Treasury's takeover of thegovernment sponsored enterprisesFannie Mae and Freddie Mac on Septempber 6, 2008, and the federal bailout ofAmerican International Group on September 16.
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.
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. 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, liquidTreasury 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.
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. 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.Kashkari favored getting distressed assets away from the banks the most among Treasury staff. 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.
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, earning Kashkari the nicknames "bailout czar" and "the $700 billion man". 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.
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. 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. Kashkari also chaired the five-member investment committee within Treasury that decided which banks would receive TARP money.
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.”
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. However, after Obama won the election, his transition team asked Kashkari to remain at Treasury after the inauguration for a limited period. He left the Treasury Department on May 1, 2009, replaced at the helm of TARP by Herbert M. Allison.
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. Another public critic, RepresentativeGregory Meeks, later thanked Kashkari for his service. Kashkari also won praise from Paulson and Timothy Geithner, Paulson's successor as Treasury Secretary and Kashkari's boss under the Obama administration.Neil Barofsky, who oversaw TARP within Treasury as a special inspector general, commended Kashkari's commitment to the job but criticized his actions. 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."
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.
In December 2009 Kashkari was named a managing director at the investment firm Pimco, in charge of new investment initiatives. Pimco, which had traditionally focused on bonds, hired him to broaden its focus into equities; Pimco later named him global head of equities. 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. Pimco cited Kashkari's expertise in a confidential presentation encouraging investment in a new fund of distressed mortgage bonds. 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.
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.
Kashkari says he first considered running for Governor of California after Republican nominee Mitt Romney lost the 2012 presidential election to Obama. 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 Democrat; Tim 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. Brown is considered the favorite in the race.
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.
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. Kashkari later acknowledged his imperfect voting record.
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.