Kashkari as Paulson's 'chump'?

Whatever Neel Kashkari is earning to head the Treasury’s financial-system bailout program, he surely must be thinking that it’s not enough.

At a hearing held by the House Oversight and Government Reform subcommittee today, one congressman questioned whether Kashkari was Treasury Secretary Henry M. Paulson’s "chump."

Another congressman, firebrand Rep. Dennis Kucinich (D-Ohio), lambasted the Treasury for unilaterally deciding this week to junk its original rescue plan of buying bad mortgages from banks.

"Maybe this is some kind of game to some people in the administration," Kucinich lectured the 35-year-old Kashkari. "They're on their way out of office and they just feel they can do whatever they want."

Even a Republican, Darrell Issa of San Diego County, joined in. "I don't know whether to call this 'fire, ready, aim' or something more pejorative," he said of the rescue program's shift.

Kashkari repeated Paulson's assertion Thursday that the Bush administration's efforts had stabilized the banking system with the program's direct capital injections into banks and other financial firms. "Our system is stronger and more stable than just a few weeks ago," he said.

Bloomberg News has an entertaining read on the hearing, including the "chump" exchange, here.

Photo: Neel Kashkari is sworn in before his House testimony today. Credit: Brendan Smialowski / Getty Images

Comments

[Keith]

I bet Kucinich voted for the laws that required banks to give loans to poor people that were unable to pay those loans back. I am amazed all the same congressmen that were involved in causing this credit problem were re-elected for another 2 years in congress. What exactly does it take to get fired from Congress?

[Tomsk]

You-got-that-right-about-Kucinich!
G.Bush's-rating-maybe-25%,but
the-Congress's-is-9%(all-time-low!)

[David]

I believe Congress actually initially wanted Treasury to do what they're doing now... investing in equity rather than buying distressed assets.

It's easy for Congressmen with absolutely no sense of accountability of their own to attack the Treasury "newbie" when many of the policies they advocated many years ago (homeownership for everyone) is at the root cause of the mortgage mess we're in now.

Congress is fulll of very very small men..... and yet we continue to re-elect them.

[martscan]

Kashkari's salary at Treasury is between $135K-$175K, depending on his 'level' designation. A mere pittance compared to the $800K, or so, he was making at Goldman. However, the pedigree of his resume is probably worth at least an additional $100M during the course of his career. No doubt, some day he'll be CEO of Goldman.

[John]

How quickly the members of Congress forgot or did not know! The current crisis in the mortgage industry started with the Community Reinvestment Act of 1977. It forced the banking industry to provide mortgages to individuals that did not qualify otherwise. The situation was made worse with the repeal of the Glass-Stegall Act in 1999. For Congress to grandstand at this time is hypocrisy. They made it possible for the current situation to evolve.

[bob]

Kashkari did an outstanding job dealing with Rep.Cummings shouldn't they have someone from Maryland who actually knows about economics asking economic questions?? It's not an over night fix and there is no plan for this kind of disruption in the system. It will be an educated guess at best can someone actually say what they want to say! It's killing America.

[xBIGxEASYx]

The CRA has never required institutions to make high-risk loans and specifically emphasizes loans be made in a safe and sound manner. There are no specific penalties for non-compliance with the CRA, unless there is found to be a violation Equal Credit Opportunity Act.

[Nemo]

Assume, like all the commentators here appear to see so clearly, that Congress was responsible starting 1977. Treasury could have said that they cannot do anything about it so let everything fail and the markets will take care of the mess in some time. Instead they wanted $700B to fix the problem. They got it. Halfway through they realize they want to do something else with it. What sense does that make? They did not know before getting the $700B that the problem stems from 1977 and they could not fix it? Why give away half that money to banks? As a joke? I mean I can break a pipe in my house and cause flooding. What do you say to the plumber who charges to fix it and then cannot?

[Joel]

And we're supposed to have confidence in another former employee of Goldman Sachs aka FOP (Friend of Paulson)...because?

And, to be truthful, we can throw blame around to this one and that one all we want...but the blame for the trouble we are in lies with all of us. All of us? Yup you got that right. Living beyond our means is what got us into this mess. Cleaning up our own personal financial houses and then cleaning up our local, state and federal financial houses is one sure way to work toward a solution.

That means doing something that not that many people know how to do. To live on what you earn. It's not easy or a simple way to live but it brings peace of mind and security. Try it. Just try it

Peace

[martscan]

Contrary to most comments and inferences made at this site, the CRA, or any legislation since the Fair Housing Act of 1968, has NEVER "required" any bank or lending institution under the aegis of the four principal federal financial regulatory agencies to make loans other than in a "safe and sound manner." Certainly, there has NEVER been a law mandating any institution to make high risk loans. That many now criticize Congress for what they perceive as ignorance only highlights the stupidity and lack of factual information of the commentators. These laws were intended to preclude the practice known as 'redlining', which was essentially discrimination against whole geographical areas identified as poor, and less than desirable, in large urban, demographic zones arbitrarily identified as such. Redlining consisted of flat out refusing loans regardless of qualifications to making terms, interest charges, covenants, qualifications, etc, oppressive and, by definition, discriminatory. Ironically, a study conducted by the Federal Reserve of loans made under the provisions of the CRA determined that these loans were as profitable as the banks' regular loans...dispelling the notion that low income groups were not responsible mortgagors. Further, to equate the CRA with Glass-Steagle as a causative link to the housing asset bubble is a contradiction in that whereas the CRA is construed as being controlling of bank activity, the repeal of Glass-Steagle, by dint of Gramm-Leach-Bliley, was/is liberalizing and a regulatory freeing agent of bank activity. IMO, the two most salient government effected policies that contributed to the housing crash, credit crunch and proliferation of esoteric instruments such as $60T of credit default swaps, has been the Gramm Act and Greenspan's keeping the Fed Funds rate at 1%, effectively, free money.

[Ron]

Keith, pull your head out already.

Why don't you look at Bush's Record of Achievement on Expanding Home Ownership; Chapter 7 of his book of accomplishments on the White House website. http://www.whitehouse.gov/infocus/achievement/chap7.html

Or read Bushes statements on how EVERYONE needs to buy a home or the terrorists win. The White Houses goal is 5.5 million more homeowners by 2010, including one million minority homeowners. http://www.whitehouse.gov/news/releases/2002/06/20020618-1.html

In his speech from June 2002, Bush states:

"Well, probably the single barrier to first-time homeownership is high down payments. People take a look at the down payment, they say that's too high, I'm not buying. They may have the desire to buy, but they don't have the wherewithal to handle the down payment. We can deal with that. And so I've asked Congress to fully fund an American Dream down payment fund which will help a low-income family to qualify to buy."

"It is essential that we make it easier for people to buy a home, not harder."

Or you could read any of the other 480 speeches Bush made on "home ownership" – none issuing any kind of warning to home buyers.

Maybe you hadn’t noticed that the Bush administration has been borrowing and spending hand over fist for the past eight years and encouraging Americans to do likewise in pursuit of the so-called American dream. Or maybe you are ignorant of who exactly has been running the country and making disastrous fiscal policy. But go ahead, blame others, Republicans always do.

[Steve]

What a cluster. Both Paulson and Bush should be stripped of thier personal assets for this debacle. Where the hell is the money, nothing has changed for the consumer for over a month, besides a bunch of bank CEO's walking away with millions from us chump taxpayers.

[Charlie F]

This pretend interview of George Bush with regard the bailout by two Aussie political comedians gave me a good chuckle. So I thought, with all the gloom around, I would share it with the hope it gives someone else a good laugh too.

http://www.youtube.com/watch?v=kUexsBNd96Y&feature=related

They play different characters and here's two more that I enjoyed...

http://www.youtube.com/watch?v=OQsBGxhbYl4&feature=related

http://www.youtube.com/watch?v=LLlzcPgCYSk&feature=related

[~~]

Hey.
Dennish Kucenich is one of the best most honest congressman ever. You think the good guys are the bad guys and You almost deserve the microchip in your face you'll wind up with as the new world order reveals itself further.

[Steve]

Tom Petruno had something happen to him as a child--he has to be the most negative, bitter business writer I've ever read--find some fun in your life dude--I've hated looking over you column for ten years--it always has a bitter tone to it--even in boom times.

[Tom Petruno]

Steve: I just hope your comment will be read by the many people who've insisted over the years that I'm not angry/pessimistic/bitter enough.

When it comes to people's money, I prefer to favor realism over either optimism or pessimism.

Best,

Tom Petruno

[Joel]

To Steve who posted on 11/16/2008 @ 9:04AM...I really have to disagree with you buddy. I, for one, truly enjoy reading Money & Co. because I receive information, and perspectives, I literally find no where else. Do I agree with everything Tom writes? No. Do I agree with what every poster comments? Hardly. But that is the beauty of the internet isn't it? To allow for the free exchange of thoughts and ideas? How could you complain about that? Thanks Tom
Peace

[Maggie Knowles]

Many of you are misinformed regarding CRA and the "subprime" mortgage meltdown. Poor people did not create our current economic downturn, rich people did. All you have to do is turn your channel to C-SPAN and tivo senate and house hearings on the subject to understand better. Or you can try reading various blogs, newspapers, books, and magazines. One of the reasons we're in this mess is that a majority of misinformed people voted for Bush TWICE, placing their social issues ahead of their economic issues. Getting back to CRA, here's something from Market Watch on the subject:
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
http://www.marketwatch.com/News/Story/Story.aspx?guid=1554ca7dcf60478e81cdb9569be8a986&siteid=nwhreal&sguid=beR9MeZICkOsFDx7Xy92QQ
or
http://tinyurl.com/6lz24o

"...there's evidence that CRA-covered lenders did not, in fact, throw all caution to the wind. Analysts recently found that borrowers with subprime loans were three to five times as likely to go into default as those who got "affordable mortgages," such as CRA-related loans, through a program designed to expand homeownership.

"Though borrowers in this program usually have greater credit risk than traditional prime borrowers, the vast majority of loans originated under this program feature terms associated with the prime market: 30-year fixed-rate loans amortizing with prime-level interest rates, no prepayment penalties, no balloons, escrows for taxes and insurance, documented income, and standard prime-level fees," according to the study.

The results point in the same direction as other data: CRA isn't the major mover behind the massive housing and subprime problems.

The current mortgage crisis "was not caused by the CRA and it was not caused by poor people getting homes," said Jack Kemp, former secretary of the U.S. Department of Housing and Urban Development and the 1996 Republican vice presidential nominee, at an Urban Land Institute conference last month. "The problems were caused by lenders who took advantage of the system. The claim that the CRA caused all these problems is nonsense."
A key point among CRA advocates is that subprime lending was driven by institutions not covered by CRA.

"The reason there is an inconsistency with the arguments pointing a finger at CRA for the explosion of subprime is because the vast majority of subprime lending were not loans originated by institutions covered by CRA," Retsinas said. "They were made by large institutions that don't exist anymore."

As evidence, consider this: During the peak years of the subprime boom, CRA-covered banks made about 25% of subprime loans, according to Michael Barr, a law professor at the University of Michigan who has testified before U.S. lawmakers on CRA. The other 75% of the loans were made by independent mortgage companies or depository affiliates not subject to comprehensive federal supervision. "

[Jason]

It all started 95 years ago. The creation of the Federal Reservev gave the bankers the ability to control our money and charge us interest to use it. Now our poor dollar is workt 2 cents compared to it's value prior to 1913. Yes, there alot of mistakes and intentional law changes since then that allowed our already fraudulent economy to be wounded even more. But let us never forget the only path to fixing this is repealing the Federal Reserve Act of 1913. Printing our own money again and backing with something besides thin air.

[JS]

First, for those of you who insist one party is responsible, kindly stop and remove your head from your a$$ - all politicians are entangled in a web of "dealmaking" that takes good legislation, and turns it into garbage. Bush's $700 bil turned into $840 after the house and senate mangled it to "get it passed" (both controlled by Dems, but clearly approved by enough of each party), yet no-one is asking where that pile of cash went. Where are the indignant Democrats & Republicans?

Second, the entire bailout is is mistake. While it may stimulate segments of the banking system, most notably the bonus of the chief executives, it is akin to giving an aspirin to a person who's skull has just been crushed - it allows you to announce to the voters that you're doing something, but really won't make a meaningful difference to the root of the problem.

[Harold the Hedge Fund manager]

Congressman Elijah Cummings is an idiot. He is typical of the future of American politics. You will see more like him elected.