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Bailout Brings New Treasury Position

Published 10/06/08 Craig Harrington - Print Article
E-mail - editor@economyincisis.org

Neel Kashkari is expected to be named the interim head of the newly created Office of Financial Stability as early as today, according to Bloomberg. Kashkari will be handed the reins to the largest government intervention in U.S. history by leading the agency in charge of managing the $700 billion bailout package President George W. Bush signed into law Friday.

Kashkari currently acts as assistant secretary for international economics and development at the Treasury Department. He is a top aide to Treasury Secretary Henry Paulson and a former executive vice president of Goldman Sachs & Co. Goldman Sachs is also the previous employer of Henry Paulson.

Kashkari is expected to be terminated from the position after the Bush administration leaves office in January 2009. While we should only expect Kashkari to be a prominent public figure for a few months – before likely returning to the highly profitable private sector – the cabinet position and Office of Financial Stability will almost certainly remain.

When creating new positions within the executive branch, most presidents regardless of party affiliation, choose to continue those of their predecessors. The new office plans to hire consultants from several asset-management firms and will add perhaps two dozen new employees. Officials within the Treasury do not expect the new office to be capable of orchestrating government auctions and purchases of debt for several weeks.

By creating this new position the government is finally showing some proactive response to Wall Street’s fiasco. The Office for Financial Stability will be tasked with overseeing bailout provisions, aiding to prevent foreclosures and enforcing limitations on salary and compensation for corporate executives. The bailout package grants unprecedented authority to the Treasury Department, and this office will be a major factor in the U.S. financial markets from now on.

Holding two of the most important positions within the Treasury Department, Kashkari and Paulson, are now held by former board members at Goldman Sachs. As the auctions and other dealings of the bailout proceed, it will be interesting to note whether Kashkari, Paulson or both favor their old firm during negotiations. Considering the absolute malfeasance on the part of American investment houses, that essentially stole and swindled from millions of investors, the American people cannot allow any more government favoritism.

Source Bloomberg:

As assistant secretary for international economics and development at the Treasury, Kashkari is a senior adviser to Paulson and counsels him on key policy matters, according to the department's Web site. The decision for Kashkari, 35, to run the new department known as the Office of Financial Stability, may be announced as early as today, the newspaper said.

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Paulson had urged Congress to immediately give him almost unchecked legislative authority to take action. Lawmakers responded by demanding increased oversight, more aid to prevent foreclosures and limits on executive compensation at companies that benefit from the program.

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