Washington’s Former Bailout Chief Gets Key Job At Federal Reserve

November 10, 2015, 8:53 PM UTC
Neel Kashkari
Neel Kashkari, on Friday, Feb. 28, 2014. Kashkari, former head of the U.S. Treasury's bank bailout program, discussed his decision to run for governor in California.
Photograph by Bloomberg via Getty Images

Neel Kashkari, who as a top U.S. Treasury official managed a key part of the banking and auto industry bailout during the financial crisis, was picked Tuesday to be the next president of the Minneapolis Federal Reserve Bank.

Previously an executive at Goldman Sachs and at bond fund Pimco who ran for California governor last year, Kashkari will take over from Narayana Kocherlakota on Jan. 1.

Kashakari has been a critic of the Fed’s accommodative monetary policies, warning that its easing policies are less effective as underlying U.S. economic growth slows, and could also spark inflation.

He will join the U.S. central bank just as Fed Chair Janet Yellen plans to begin weaning the U.S. economy from seven years of near-zero interest rates.

The choice of Kashkari, 42, marks a departure for the Fed’s smallest regional bank, whose current chief is one of the central bank’s most enthusiastic supporters of monetary policy easing.

Kashkari’s varied experience in politics, banking and government make him an unusual addition to the Fed policy-setting table. He also has a theatrical flair: in 2014 in what he said was both a publicity stunt and an effort to draw attention to poverty in the California gubernatorial race, he lived as a homeless man for a week. He posted a Facebook video about it afterwards.

Named in People Magazine’s “sexiest men alive” issue in 2008, Kashkari ran the government’s $700 billion Troubled Asset Relief Program credited by some for saving Detroit’s auto industry and for playing an important role in keeping the financial industry from collapsing.

In 2009, he went to work for Pimco to build an equities business, leaving in 2013 and becoming the Republican candidate for California governor the following year. He lost handily to Jerry Brown.

Kashkari will not get to vote on Fed policy until 2017, according to the schedule of rotating votes at the U.S. central bank’s policy committee.

In 2012, as the Fed launched its third round of bond-buying, Kashkari was dismissive.

“At the end of the day, this is not going to lead to real economic growth,” he told CNBC at the time. “Unfortunately, it likely leads to an inflationary outcome.”

The son of Indian immigrants, Kashkari was born in Akron, Ohio and was an aerospace engineer before joining Goldman in San Francisco.

He is the third Fed regional bank president appointed this year who once worked as a Goldman Sachs executive.

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