Tuesday, October 7, 2008

Some disturbing news: TARP to be run by not 1 but 2 Goldman execs

From the Financial Times:
Hank Paulson has appointed Neel Kashkari, a protégé from his days as chief of Goldman Sachs, to run the US government's plan to purchase troubled assets from financial institutions.

Mr Kashkari is one of the US Treasury secretary's closest policy advisers, taking a lead role in developing the department's response to the housing crisis and then emerging as a point-person on the $700bn (€518bn, £402bn) bail-out.

Mr Kashkari was almost invariably at Mr Paulson's side during the frenzied negotiations over the passage of the “troubled asset relief programme” on Capitol Hill during the past two weeks. He arrived at the Treasury in 2006 from the San Francisco office of Goldman Sachs, where he worked as an investment banker focused on information technology security companies, advising on financing and on mergers and acquisitions.

His selection to run the Tarp came as the Treasury asked financial services companies interested in managing the troubled assets in the programme to submit their applications before 5pm on Wednesday. The Treasury is running separate competitions for the management of its portfolio of whole mortgage loans and portfolio of mortgage-backed securities, and is expected to announce the winners next week.

Nevertheless, the core of the Tarp - a reverse-auction mechanism to relieve banks of their ailing mortgage holdings - is not expected to start running until next month.

Mr Kashkari's appointment highlights the extent to which Mr Paulson has entrusted former Goldman executives with important policy portfolios throughout his response to the financial crisis."
RW: I have a problem with this. The most contentious point ot the TARP bill – in my opinion – is how the bill entrusts one man, Hank Paulson, with roughly $700 billion to purchase assets under no specific pricing mechanism. An excerpt from the Economist:
"Mr Paulson’s first proposal left Democrats cold: it would give the Treasury virtually unchecked authority for two years to spend up to $700 billion on mortgage assets or anything else necessary to stabilise the system. It looked like a power-grab. Democrats countered with several conditions: troubled mortgages would be modified where possible to keep homeowners in their homes; an oversight board would watch over the programme; taxpayers would share any gains for participating companies via shares or warrants; and executives’ compensation would be capped."
RW: The power grab still stands. The newest revisions of TARP did nothing to reduce the unchecked authority – except to set up a nondescript “oversight” program – that the Paulson will assume. And now, we are entrusting a previously unknown Goldman vet with those funds as well.

Rebecca Wilder

3 comments:

  1. Uh-Huh, Goldman is the dirtiest little brothel on the street. This whole scam is to set them and a select cabal of cronies up.

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  2. On one hand it makes sense, Paulson is selecting someone he knows and trusts, and he's has to think he has some talent. It's not at all ironic, but, hmmm, how do I say it...It's like a parent that's the coach of his son's football team. Even if it's not true, there's a lot of speculation that the only reason the son is the starting quarterback is because he's the coaches son.

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  3. "Even if it's not true, there's a lot of speculation that the only reason the son is the starting quarterback is because he's the coaches son."

    RW: Well said!

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