Bailout Architect Runs For California Governor; World Laughs
I want to apologize for this space being blank for quite some time. I actually spent the bulk of the last two days on a long blog post about the "Dr. V." story in Grantland. But then I got all the way to the end, and realized I was completely wrong about the entire thing.
So, I spiked my own piece. Now I've been in Talk Radio-style "This is totally dead air, Barry" territory for about two weeks. I could swear I saw a cobweb when I logged on this morning.
So thank God for Neel Kashkari, and the news that this goofball footnote caricature of the bailout era has decided to run for Governor of California. Never in history has there been an easier subject for a blog post.
If you don't remember Kashkari's name, you might be excused – he was actually better known, in his 15 minutes of fame five years ago, as "The 35 year-old dingbat from Goldman someone put in charge of handing out $700 billion bailout dollars."
Now you remember. That guy! Neel Kashkari when he first entered the world of politics was a line item, usually the last entry in a list of ex-Goldman employees handed prominent government and/or regulatory positions, as in, ". . . and, lastly, Neel Kashkari, the heretofore unknown Goldman banker put in charge of the TARP bailout program . . ."
Kashkari was not just a former Goldman banker handed a high government post – he was a former Goldman banker handed a high government post by a former Goldman banker, in this case former Goldman CEO and then-Treasury Secretary Hank Paulson.
Neel was also the human parallel to the original TARP proposal written by Paulson, which was famously just three pages long.
Paulson's TARP proposal was essentially the last, unaired episode of Beavis and Butthead, with the three pages of script just containing a single scene in which Butthead walks into the U.S. Senate and says, "Can you, uh, like, give us 700 billion dollars? Uh-huh-huh."
Kashkari then was more or less an equally blank slate, a little-known tech banker from Goldman's San Francisco office who somehow ended up being Paulson's choice to administer a bailout that Paulson wanted to feature no oversight whatsoever. The original three-page proposal specified no review "by any court of law or any administrative agency."
It never came to that, not exactly – Paulson had to expand his three-page proposal – but it's worth remembering now that the Treasury's original plan for the bailout was to give literally unlimited powers to distribute $700 billion of taxpayer money to a low-level banker that prior to 2006, even Hank Paulson had never heard of.
So Kashkari takes the job as bailout czar and starts hurling fistfuls of cash at the banks, in a fashion that turned out later to have been beyond haphazard. Critically, even though the Treasury promised only to give out TARP funds to institutions that were "healthy" and "viable," Kashkari had no protocol in place to even decide whether a bailout recipient was solvent or not.
They forked over billions in cash to failing institutions and then failed to enforce crucial provisions, like for instance measures put in place to prevent executives from bailout-out companies from giving themselves huge bonuses.
This latter failure was what led to one of Kashkari's more infamous public appearances, in which Maryland congressman Elijah Cummings raked Kashkari over the coals for allowing AIG executives to give themselves $503 million in bonuses. "I wouldn't want to be asking my friend for some money to stay afloat," hissed Cummings. "Then my friend, who can barely afford to go to McDonald's, sees me in a restaurant costing $150 a meal. There's absolutely something wrong with that picture!" He added:
I'm just wondering how you feel about an AIG giving $503 million worth of bonuses on the one hand, and accepting $154 billion from hard-working taxpayers. You know, because I'm trying to make sure you get it. What really bothers me is all these other people who are lined up. They say, well, is Kashkari a chump?
After this "chump" episode, and others, Kashkari apparently became despondent. He and his wife reportedly were particularly upset by a snickering item in Gawker. The item read, "Financial Crisis Taking a Toll on Our Favorite Asshole Banker," and made the neatly cruel observation that that Kashkari, who was a fit/lean/bald banker of Paulsonian persuasion when he arrived in Washington, had begun "putting on classic stress-related weight under his chin."
The item featured before and after photos. The "after" photo was shot from just below chin level. It was brutal.
Now, a lot of people have been ripped in Gawker. I think everyone with a Q rating above 0.00003 has been ripped in Gawker. I personally remember having to Google-image Peter Beinart because Gawker described me as looking like the computer-generated love child of Beinart and Ashton Kutcher. It's an Internet-age rite of passage and they give great service – I mean, Gawker's insults are almost always really good. Probably most people who get ripped on the site flip out at first, and then laugh about it later.
Not Kashkari. He was so mortified by items like the Gawker bit that he literally disappeared into the woods like Ted Kaczynski and committed himself to a vengefully ascetic fitness regimen, apparently determined to return someday to society and have the last word.
This is not a joke. The Washington Post actually tracked Kashkari down in the woods after the bailouts. They photographed the tiny shed he'd built for himself in Nevada County, California. They were shown the incredible list-of-things-to-do he'd written on his way out of Washington. I have to keep repeating this, but this isn't a joke:
1. buy shed
2. chop wood
3. lose twenty pounds
4. help with Hank's book
The Post was then invited to watch as Kashkari lived out his hilarious homage to Rocky IV, getting in shape by his lonesome in the woods, fiercely splitting log after log with an ax, recalling a past slight with each blow:
Kashkari raises his ax.
"It felt like I got jumped."
"Like three guys beat the crap out of me."
The massive block of sugar pine breaks, the crack bouncing off the mountain.
Kashkari is recalling his testimony before Congress, while splitting logs to feed the stove for the winter. He is down to his last two chain-sawed trees.
"Members of Congress will tell you they agree with you, and then in public they blast you. I understand their anger, but the playing at politics when so much was at stake -- "
Whack. The ax blade flies off its wooden handle.
After enough of this, there was no more stress-related neck-jelly, no sir!
Kashkari, in shape again, soon-re-entered the finance world, taking a high-profile job with the bond fund PIMCO, run by notorious Wall Street insider Bill Gross.
The new choice of employer was significant because as numerous critics have subsequently pointed out, PIMCO was one of the major beneficiaries of the government's rescue of Wall Street. In December 2008, the Fed hired PIMCO to be one of four investment firms put in charge of managing a Fed program to buy up the toxic mortgage-backed securities that were threatening to tank the economy at the time.
Gross, at the time, warned that the government would have to "open up the balance sheet of the U.S. Treasury" (i.e. the state would need to cough up taxpayer money) in order to prevent "continuing asset and debt liquidation" (to prevent Wall Street jerks from being blown up by their own bad bets). Conveniently, Bill Gross and PIMCO happened to be sitting on $500 million of mortgage-backed holdings at the time. Which meant, as Babson College professor Peter Cohan put it:
Bill Gross, who manages $830 billion, has convinced the U.S. Treasury to use your taxpayer dollars to bail him out of his bad investments.
So Neel Kashkari was the administrator of the biggest corporate welfare program in history, took shit for it ("Beating on the Hill," he would pencil for certain times in his calendar), went into the wilderness to get his mind and body right after the experience, then re-emerged to take a high-paying job with a company that was a significant beneficiary of government largesse.
While at PIMCO, Kashkari dipped a little toe in the lake of politics once again by penning an editorial for the Post ("No more me-first mentality on entitlements," July, 2010) denouncing government aid programs. He argued – and again, this is no more a joke than the Rocky-IV-cabin-in-the-woods thing was – that even though we have an economy successfully founded on self-interest, accepting government benefits, by which one assumes he means things like Medicare, is the wrong kind of selfish:
Our belief in free markets is founded on the idea that each individual acting in his or her self-interest will lead to a superior outcome for the whole. The financial crisis has reminded us that free markets are not perfect -- but they do allocate capital better than any other system we know. A "me first" mentality usually makes markets more efficient.
But this "me first" mentality can also lead to shortsighted political decision making . . .
Kashkari's solution? People who accept government benefits should take the long view and just say no:
Cutting entitlement spending requires us to think beyond what is in our own immediate self-interest. But it also runs against our sense of fairness: We have, after all, paid for entitlements for earlier generations. Is it now fair to cut my benefits? No, it isn't. But if we don't focus on our collective good, all of us will suffer.
Again, this came from a guy who handed out hundreds of billions of dollars of welfare to Wall Street companies, effectively subsidizing the massive compensation packages of Wall Street executives. This same person then went to work for a company that got a fat government contract to help other Wall Street investors unload their bonehead investments on the taxpayer.
Then, after all that rescue money disappeared, Kashkari made the interesting observation that there was not enough left over to pay benefits for other people. So, he effectively said to Americans on benefits, stop being so selfish. Tighten your belts. All of us will suffer otherwise.
This is the person who has now decided to run for Governor of California. It seems Jerry Brown has become his own personal Dolph Lundgren. A friend of mine sent me the news by email and suggested I say nothing at all about his decision, other than to post the headline above the following clip:
Kashkari's platform seems to be centered around restoring jobs and schools, but also seems targeted at waste – he called Jerry Brown's $68 billion high-speed rail project a "crazy train" and said it reflected "misplaced priorities."
Humorously, and predictably, Kashkari's campaign has already sprouted serious leaks. It turns out he has a somewhat spotty voting record (I do, too, to be honest, but I'm not running for governor), and he's already had to acknowledge publicly that he has not always voted – although, he says, "I believe voting is very important."
The Kashkari story is a perfect little allegory about the arrogance and cluelessness of the people who run the American economy. Kashkari talks passionately about free markets, forgetting that he was the individual who was actually in charge of the biggest-in-American-history government program to subvert the free market, bailing out countless institutions that should otherwise have gone out of business due to their own incompetence and corruption.
He talks about how the "free markets" allocate capital better than any system we have, but then again he was the person who had to step in when that system failed and institute a different system of capital allocation, one in which public treasure was unorganically re-allocated from taxpayers to private companies. His complaints about "misplaced priorities" are almost beneath comment – there's just not much to say about someone who committed public funds to million-dollar bonuses but believes regular people accepting government benefits have a "me-first" mentality.
Anyway, having this guy run for public office is like a gift from the blogging gods. How funny will this get? Will this one go to 11? I'm taking the over.
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