Daily Archives: November 15, 2008

Lawmakers Grill Kashkari on Changes in TARP Plan

Assistant Secretary of the Treasury Neel Kashkari

Assistant Secretary of the Treasury Neel Kashkari

I just sent this e-mail to Neel Kashkari, the Assistant Secretary of the Treasury. He is the guy in charge of the $700 billion bailout. They really beat him up badly this morning. You can read all about Neel in the “Pages” section of my profile.
Dear Neel:
Please be assured that your many supporters are thinking of you during this difficult time. I was at the entire hearing this morning and it was brutal. I did not bother you because you were so busy coping with lawmakers and the press.
Kucinich’s conduct was to be expected, but the hostility of some of our fellow Republicans was a surprise. It is difficult to image what you must be going through now, and I know you made a tremendous sacrifice to serve in government. Along with everyone who knows you, we are grateful to have a statesman of your caliber leading us through the global financial crisis.

Lawmakers Grill Kashkari on Changes in TARP Plan
By MICHAEL R. CRITTENDEN, November 15, 2008

WASHINGTON — U.S. lawmakers kept up the criticism of the Treasury Department’s management of the $700 billion financial rescue plan on Friday, accusing officials of being disingenuous in the way they sold the program to Congress.

“I don’t know whether to call this ‘fire, ready, aim’ or something more pejorative,” Rep. Darrell Issa (R., Calif.) said at a U.S. House subcommittee hearing. Treasury Assistant Secretary Neel Kashkari, who is heading up the government’s implementation of the rescue plan, defended the department’s actions, saying that no one should expect the plan to solve all of the nation’s economic problems. “It’s not a stimulus, it’s not an economic growth plan,” Mr. Kashkari told lawmakers. “It’s an economic stabilization plan.”

He also declined to say whether Treasury planned to request access to the second $350 billion before President-elect Barack Obama takes office. Treasury officials, Mr. Kashkari said, have “not made any determination” on when or if such a request could occur. Kashkari defended the Treasury Department’s actions. Lawmakers were especially critical of Treasury Secretary Henry Paulson’s announcement earlier this week that the $700 billion rescue plan likely wouldn’t be used to purchase troubled assets from financial institutions. When conceived during negotiations between Treasury and lawmakers, the plan originally was to have the federal government buy up the assets in order to unfreeze credit markets.

“I think it’s fairly obvious that Congress would have never passed the [rescue plan] had it known how Treasury would marshal the resources it was given,” Rep. Dennis Kucinich (D., Ohio) chairman of the subcommittee, said during his opening remarks.

Treasury’s actions to help homeowners were also a source of criticism. Kucinich accused Paulson of taking scissors to the legislation that authorized the $700 billion, cutting out the section that requires Treasury to use the program to achieve the goal of reducing foreclosures. Other lawmakers said Treasury is too focused on banks and not on cash-strapped consumers. “This administration wants to privatize Wall Street’s gains and socialize Wall Street’s losses,” said Rep. Elijah Cummings (D., Md.).

Mr. Kashkari said Treasury continues to focus on the foreclosure issue and said Mr. Paulson is “passionate” about preventing foreclosures. “We are using every tool at our disposal to get at this problem,” Kashkari told lawmakers. When asked directly by lawmakers how he would solve the housing crisis, Mr. Kashkari said lowering mortgage rates would be the best long-term solution. Lower rates, he said, would allow now-struggling homeowners to refinance into sustainable long-term loans.

Mr. Kucinich also grilled Mr. Kashkari on the Treasury’s role in fostering the acquisition of National City Corp. by PNC Financial Services Group Inc. Lawmakers have been critical of the deal because PNC Financial has received preliminary approval for billions in government funds, while National City was not chosen to take part in the capital injections.

Mr. Kashkari declined to speak about specific institutions, including PNC Financial and National City, but said federal banking regulators determine which banks are allowed to apply for the Treasury’s capital injection program. In a heated exchange with Mr. Kucinich, however, he said Treasury shouldn’t prop up struggling institutions. “I don’t think it’s a good use of taxpayer money to put taxpayer capital into a financial institution that is going to fail,” Mr. Kashkari said. Mr. Kucinich fired back to Mr. Kashkari, “That statement that you just made you will hear about for the rest of your career.”