Kashkari: 'We didn't know our programs would work'
Neel Kashkari, Treasury's former $700 Billion Man -- the official in charge of handing out last year's government TARP bailout -- just gave an interview to CNBC's John Harwood, one of Kashkari's first since leaving office.
"We didn't know that our programs would work," said Kashkari, in a surprisingly candid statement. "Today, I feel blessed that our programs appear to have worked, but at the time, we were making our best shot. We didn't know."
Quick recap: A little more than a year ago, Lehman Brothers had collapsed. The markets were in freefall and then-Treasury Secretary Hank Paulson looked around and saw the American financial system collapsing. He went to Congress and said: I need $700 billion to buy toxic assets off the balance sheets of the big banks to get the markets working again.
Congress asked: Why don't you use the money to invest directly into banks?
Paulson: I think my way is better.
Congress: Okay, here's the money.
Two weeks later, Paulson said: Actually, I do need to invest directly in the banks. Over the past two weeks, the situation has gotten much worse than when I asked you for the money, so this is what I have to do now.
Paulson put his deputy, Kashkari, in charge of handing out the money and investing it. Like Paulson and many others in government, Kaskhari was a Goldman Sachs alum, a connection that drew its own heat on Capitol Hill.
In subsequent months, Kashkari was hauled before Congress and asked about the bailout. In most hearings, he was blistered. Rep. Elijah Cummings (D-Md.) at one point asked Kashkari whether he was a "chump." How Kashkari held his tongue is beyond my understanding.
Since leaving Treasury earlier this year, Kaskhari has been spending time with his wife at a cabin near Lake Tahoe, "chopping wood," Harwood said.
Here are some of the highlights of Harwood's interview. When CNBC posts it, I'll embed it below:
-- "On the one hand, we wanted to tell the American people just how terrified we were, what the consequences would be if we didn't act, because that would catalyze support. On the other hand, we didn't want to terrify the markets even more than they already were."
-- "Some of the worst times, after some of my hearings in Congress when I just got beat up like I never expected, I just locked myself in my office and decompressed for a couple of hours."
-- "I had grown very skeptical of Congress's willingness and ability to make tough decisions. I was against us going to Congress. I was afraid we wouldn't get the authority and it would do more damage by asking. But I saw the best in our political system in a time of crisis. It was one of the worst times in our country's history, but in many ways it was the best, watching all those people come together to put out the fire."
-- On mistakes he made during the crisis: "I've thought about this a lot as I'm sitting in the woods. We always underestimated the length and depth of the crisis. At every turn, it was longer than we expected and deeper. Even when we were on the Hill negotiating the TARP legislation, the markets were deteriorating from underneath us. It was very hard for us to get ahead of this crisis."
We should learn a lot more from Paulson's forthcoming book, which is due out in January.
-- Frank Ahrens
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October 20, 2009; 10:55 AM ET
Categories: The Ticker | Tags: Hank Paulson, Neel Kashkari, TARP, bailout
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