$700 Billion Bailout to be Run by Man with 6 Years Experience

(10:00PM EST – promoted by Nightprowlkitty)

Today, Treasury Secretary Henry Paulson appointed Neel Kashkari to oversee the $700 billion bailout of the nation’s financial crisis. That’s right Kashkari is now the interim Assistant Secretary of the Treasury for Financial Stability.

Who?

Neel Kashkari, a former banker at Paulson’s old company, Goldman Sachs, who earned his M.B.A. from the Wharton School at the University of Pennsylvania in 2002.

Paulson’s move certainly inspires the confidence a panicky financial community needs right now, doesn’t it?

The “Deal Journal” blog at The Wall Street Journal has some background on Kashkari. The post notes, Paulson’s “move essentially puts a new title on what Kashkari he has been doing since he joined Treasury in 2006-examining the consequences of an economic housing fallout.”

So, after two years of watching the collapse, he’s in charge of fixing it?

Come on! Kashkari has only six years of financial experience!  

No disrespect to Kashkari, but his resume isn’t who I, a taxpayer who is stuck with paying back part of the $700 billion, would hire to oversee the bailout.

Kashkari… has a few things in common with Paulson… Both are former Goldman Sachs bankers, though Kashkari, at 35 years old, is much younger and was just a vice president-level banker in Goldman’s San Francisco technology banking effort when Paulson tapped him to join Treasury. Both also are Midwesterners. Kashkari grew up in Stow, Ohio, and earned a bachelor’s and master’s degree in engineering from the University of Illinois at Urbana-Champaign. Paulson was raised in Barrington Hills, Ill. And both sport similar hairstyles- or lack thereof…

Kashkari didn’t take a conventional route into banking. He started out as an aerospace engineer… He earned an M.B.A. at the University of Pennsylvania’s Wharton School of Business…

Paulson likes to surround himself with people he’s comfortable with: people, mostly, from Goldman Sachs… Kashkari’s appointment is another example of how deep those Goldman Sachs ties go. In fact, Paulson himself was recruited by a former Goldman Sachs banker: former White House Chief of Staff Josh Bolten.

Of course, Kashkari’s full appointment needs Senate confirmation. But, that is unlikely to happen before the November election and may even be a long shot with roughly 100 days remaining for the Bush administration.

His six years of experience are comprised of four with Goldman Sachs and two with the Bush administration. Knowing how the Bush administration has worked, I suspect Kashkari likely got his federal job after contributing $2,000 to George W. Bush for his presidential re-election campaign in 2003.

This new appointment seems like cronyism to me too. Obviously, it has a “fox guarding the hen house” feel to it. But also, doesn’t putting a smart, young ideologue in charge of $700 billion ring any Iraq-type alarm bells!?

Remember back to the invasion and the people the Bush administration put in charge to run the occupation. In 2004, the Washington Post ran a story about the people the Bush administration put in charge of rebuilding Iraq. The story, In Iraq, the Job Opportunity of a Lifetime, had the subtitle: “Managing a $13 billion budget with no experience”.

The Coalition Provisional Authority (CPA), which was headed by L. Paul Bremer, was a failure. The CPA created more problems for Iraq, than it resolved. Part of the root causes of the CPA’s failure, which “was designed to be a grand experiment in nation-building”, was because the Bush administration staffed it with people “longer on enthusiasm than on expertise.”

When the U.S. government went looking for people to help rebuild Iraq, they had responded to the call. They supported the war effort and President Bush. Many had strong Republican credentials. They were in their twenties or early thirties and had no foreign service experience…

They had been hired to perform a low-level task: collecting and organizing statistics, surveys and wish lists from the Iraqi ministries for a report that would be presented to potential donors at the end of the month. But as suicide bombs and rocket attacks became almost daily occurrences, more and more senior staffers defected. In short order, six of the new young hires found themselves managing the country’s $13 billion budget, making decisions affecting millions of Iraqis.

Questionable judgment from smart people with short resumes  also helped lead the United States into the war with Iraq in the first place. In 2006, the Washington Post reported on The National Security Council’s Sesame Street Generation. The article quoted the Meghan O’Sullivan, who was then the deputy national security adviser for Iraq and Afghanistan.

For many of the generals with whom O’Sullivan consults in her current job, the painful experience of Vietnam permeates their thinking on Iraq. Not for O’Sullivan. “We are the first post-Vietnam generation, without the baggage of Vietnam, which doesn’t mean we don’t try to learn some of the lessons from there about counterinsurgency and so forth, but it’s not my first frame of reference and I think that’s a good thing,” said O’Sullivan.

Same goes for Afghanistan, where she and her team guide policy as the United States seeks to stabilize the friendly government of President Hamid Karzai installed after the fall of the Taliban. “If your frame of reference is the Soviet invasion and how they got bogged down, then I think you’d be very modest about what could be achieved in Afghanistan,” O’Sullivan said. “That’s not how I see it. I see an end of Taliban rule and a nascent democracy.”

The situation in Afghanistan is in such a bad way that the British are saying the only solution is to negotiate with the Taliban. The troop “surge” in Iraq is permanent until Bush is free and clear of the White House and our own generals caution any gains in Iraq are “fragile” and easily reversed.

In April 2007, O’Sullivan left the Bush administration, for a cushy job in academia. (She is now a lecturer and senior fellow at Harvard University’s John F. Kennedy School of Government Belfer Center for Science and International Affairs.)

At the time of her departure, the Washington Post noted, “She became involved in Iraq policy at age 33 before U.S. troops toppled Saddam Hussein, then went to Baghdad for a year as a key official of the Coalition Provisional Authority… Working for CPA administrator L. Paul Bremer, she helped write the transitional law that became the basis for the Iraqi constitution”.

O’Sullivan did such a great job in the eyes of the Bush administration, she became the top Iraq adviser at the NSC.

In Iraq, the Bush administration had $13 billion no-strings-attached to squander on the CPA. Now they have $700 billion to spend. The stakes are higher and, well frankly, the thin resume of the man in charge has me concerned about the chances of success. I know cynics, such as myself, believe that the whole point of the bailout is to enrich the wealthy, but — gosh darn it — I wish the Bush administration wouldn’t be so blatantly obvious about it.

Part of the reason Paulson asked for $700 billion is that he wanted to do something bold to reassure the markets. Putting a person with only 6 years of financial experience in charge is not a good way to reassure the markets. I doubt Kashkari is the the best qualified person for overseeing $700 billion, unless the goal the Bush administration is seeking is another epic fail.