Architect of TARP discloses backstage drama behind the program
Neel Kashkari, the architect of TARP, the $700 billion foreclosure relief program, disclosed the backstage drama behind the measure.
Kashkari was a favorite choice of the previous Treasury Secretary Henry Paulson, for making a blueprint of TARP. Kashkari narrated how one of his peers began screaming over the exploding situation – the impending collapse of the entire financial system of USA. Another nearly had a heart attack by working continuously on the bailout measure because he had no time to go to the doctor.
But Kashkari was quite blasé as he added 23 pounds to his physique, munching into tortilla chips, while the credit crisis was raging. He described the time stretching from October 2008 to May 2009 to be “like a dream.” Speaking to the Washington Post holed up in a shack in northern California woods, he said, “Sometime I think, was it real?”
Previously Kaskhari was employed with Goldman Sachs. But Paulson, who was then the chief executive of the bank, was chosen in June 2006 to become the Treasury Secretary of President Bush. Soon after, Kaskhkari became the assistant of Paulson.
In 2008 February Kashkari took over charge for making an outline for an emergency program anticipating the credit crunch’s blowing up into a fully mature financial crisis. By October the crisis had hit the country and his plan, running into ten pages, became the blueprint for the program to bailout the banks.
Kashkari admitted that he picked up “a number out of the air” while coming to a decision in tandem with Paulson about how much funds should be asked from the Congress for TARP.
Reminiscing on a talk he had with Paulson, Kashkari said, “It was a political calculus. I said, ‘We don’t know how much is enough. We need as much as we can get . What about a trillion?’ ‘No way,’ Hank shook his head. I said, ‘Okay, what about 700 billion?’ We didn’t know if it would work. We had to project confidence, hold up the world. We couldn’t admit how scared we were, or how uncertain.”
Kashkari recalled how Paulson had endured a sleepless night negotiating with Congress leaders. He referred to another time when a government economist had been in tears muttering, “Oh my God, the system’s collapsing.” The Chief Compliance officer of TARP endured a heart attack and was hospitalized working 18 hours each day for 40 running days to give the finishing touches.
Kaskhari commented that not only were they worried about the failure of the banking system but were terrified about “the day after.” It seemed an impossible task to “take over 8,000 banks.”
For seven months Kashkari endured criticism from both the media and the Congress. Legislators took him to be a chump while bloggers named him Cash-n-Carry. Ultimately he resigned and shifted with his wife into a shack and worked hared chopping wood to get rid of the bailout fat.
He assisted Paulson in penning his memoirs. Recently Pimco has engaged him as managing director to lead the firm’s investment operations.
A year following the bailout the government while admitting to its failure argued that TARP had saved the country from a worse situation – the total collapse of the financial infrastructure.
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