By Robert Wenzel
Neel Kashkari, a former bankster at Goldman Sachs, also worked as interim Assistant Secretary of the Treasury for Financial Stability from October 2008 to May 2009 where he oversaw the bankster bailout operation of the Treasury known as The Troubled Asset Relief Program (TARP) . Just prior to that, he was Assistant Secretary of the Treasury for International Economics and Development. Kashkari was appointed to this position by his fellow former Goldman crony, Hank Paulson.
In November 2015, he became president of the Federal Reserve Bank of Minneapolis.
Kashkari should be considered a financial/economic technocrat for the government. But an aggressive technocrat with his eyes set on a much bigger role for himself in government than just head of the Minneapolis Fed.
This should put into perspective a speech he delivered on Tuesday at the Brookings Institution in Washington, D.C.
He made lots of noise calling for the break-up of the bankster firms he helped bailout by shoveling TARP money into them.
In his speech, he said:
I believe we must begin this work now and give serious consideration to a range of options, including the following:
I am guessing that now that he is at the Fed, he is positioning himself as anti-bankster.
- Breaking up large banks into smaller, less connected, less important entities.
- Turning large banks into public utilities by forcing them to hold so much capital that they virtually can’t fail (with regulation akin to that of a nuclear power plant).
- Taxing leverage throughout the financial system to reduce systemic risks wherever they lie.
And expect to hear more noise from him with regard to this topic. He said in the speech:
[T]he Federal Reserve Bank of Minneapolis is launching a major initiative to consider transformational options and develop an actionable plan to end TBTF.
Starting in the spring, we will hold a series of policy symposiums to explore various options from expert researchers around the country. We will also invite leaders from policy and regulatory institutions and, yes, the financial industry to offer their views and to test one another’s assumptions. We will consider the likely benefits, costs, risks and implementation challenges of these options. We will invite the media to these symposiums and livestream them so that the public can follow along and learn with us.
Following the symposiums, we will publish a series of policy briefs summarizing our key take-aways on each issue,
But what really caught my eye about his speech is this remark (My emphasis):
When I first went to Treasury in 2006, Treasury Secretary Henry Paulson directed his staff to work with financial regulators at the Federal Reserve and the Securities and Exchange Commission to look for what might trigger the next crisis. Based on his experience, we were due for a crisis because markets had been stable for several years. We looked at a number of scenarios, including an individual large bank running into trouble or a hedge fund suffering large losses, among others. We didn’t consider a nationwide housing downturn. It seems so obvious now, but we didn’t see it, and we were looking.
As I have detailed in my book, The Fed Flunks: My Speech at the New York Federal Reserve Bank. I warned about the financial crisis in real time as it developed and I include in the book my 2004 response to a paper by two New York Fed economists who at that time said there was no housing bubble.
I believe Kashkari is sincere when he said he didn't see the housing bubble and crisis developing. As I discovered when visiting the New York Fed, Fed economists have absolutely no understanding of Austrian school business cycle theory.
They operate completely within the faulty Keynesian framework. Thus, no matter how many papers they write, how many symposiums they hold, no matter what structures or regulations they set up for the banking sector, they will not kill the beast of economic distortion caused by Federal Reserve money manipulations.
They missed the housing crisis, the financial crisis and they will miss the coming acceleration in price inflation. The Kaskari's of the world are using the economic equivalent of a hammer to listen to the economic heart rate instead of a stethoscope.
Robert Wenzel is Editor & Publisher at EconomicPolicyJournal.com and at Target Liberty. He is also author of The Fed Flunks: My Speech at the New York Federal Reserve Bank. Follow him on twitter:@wenzeleconomics