On October 13, 2016 I went to a presentation being held in the North UC Ballroom. The presentation was from the head of the Minneapolis Fed, chairman Neel Kashkari. I have long been at odds with the easy-money monetary policy the Federal Reserve has adopted since the 2008 financial crises and wanted to hear the rhetoric that came straight from the horse's mouth. Mr. Kashkari has had an interesting career he began his studies in mechanical engineering and was hired on as a contractor working for NASA. After his stint in ‘rocket science’ he went to Wharton University and obtained an M.B.A. Kashkari went on to work for Goldman Sachs for a while under the Goldman CEO at that time, Hank Paulson. Once Hank Paulson was appointed to be the United States Secretary of the Treasury by president George W Bush, Kashkari followed Paulson into the treasury as an aide.
In early 2008, when the malfeasance of the reckless bank MBS (Mortgage Backed Securities) racket came to roost, Kashkari along with treasury aide Phillip Swagel spearheaded TARP(Troubled Asset Relief Program). This is the infamous $700B program in which the treasury effectively purchased the worthless MBS off of the crooked banks balance sheet by swapping them with safe liquid treasury bills. The intent was to try to prevent runs on the banks while at the same time encouraging them to lend. Kashkari did not go into too much detail on this but he did state, ‘I’m the guy who bailed out the banks.’
After the treasury, Kashkari retreated from Washington DC. He found is way to Northern California where he would work for Pimco where he ran several funds with ‘spotty performance’. In 2013 Kashkari, wishing to return to public service ran a failed campaign in attempt to be elected Republican governor of California. In early 2015, Neel Kashkari was unanimously elected president and CEO of the Minneapolis Federal Reserve. Despite the questionable morality of the ‘bank bailout’ which Kashkari spearheaded, he did mention throughout his presentation that he is of the belief that there are certain banks which are too large and control too much influence over the financial ecosystem. Kashkari has been actively working on plans to try to ‘break up the big banks.’ He mentioned that one such proposal will be revealed November 16 in New York.
Kashkari was well spoken. He did not lecture for long but rather spent much of his time with the floor open for questions. I was amazed at how many people showed up to this presentation. I honestly, did not think that many people knew or cared about the Fed, but I was proven wrong as the ballroom was filled with well over 120 people, mostly older members of the community. I wanted to rail into him, give him a piece of my mind and that I am of the belief that the reckless monetary policy adopted by the Fed over the past eight years has accomplished nothing but blowing massive asset bubbles which sooner or later will inevitably burst ushering in a recession far greater than what was experienced in 2008. The Fed never let the recession play out and let the debt unwind, instead what they did was paper over the problem with cheap money which worked great for the portfolios of financial elites at the expense of horrible deleterious effects for the masses.
Kashkari spoke as if he was a hero. The savior of us illiterate uncouth mortals who know nothing of the workings of financial markets. He claimed that if he did not step in to bail out the banks we would've undergone that which could only be compared to ‘much worse than the Great Depression.’ If his bank account is anywhere near as inflated as his ego, he is most assuredly a very wealthy man. A gentleman sitting next to me asked him a pointed question, ‘Now that the Fed has adopted this ZIRP (Zero Interest Rate Policy) what tools does the Federal Reserve have to help combat the next recession? Kashkari's response illustrated the rampant obliviousness that underpins all face public relations of the Federal Reserve.
“Well, it is amazing that the low interest rates are not creating more business investment and economic growth. Perhaps it’s because people have been shocked by the events of 2008 and have changed their spending/investment habits. Granted, the Fed has less (firepower) now that rates are so low but what we could do is help encourage investment by keeping (long term) rates lower for longer… Another option is to (further) expand the Feds balance sheet (With Quantitative Easing).”
So there you have it, The Federal Reserve's adopted ZIRP/QE monetary policy is admittedly ineffective and yet their only solution is to keep beating the dead horse by squeezing even harder on the rotten lemon that has long been pulped dry. This is one of the most powerful people in the financial world. A well spoken, brilliant individual who you would think is well-aware of the conundrum of the box he is trapped in? This is the very box that he helped create with his TARP program and bank bailouts. But from his speech I honestly could not tell…
Kashkari, the hypocritical hero. He bails out the big-banks (but wants to break them up.) He saves us all from Financial Catastrophe (The Greatest Depression) and yet he admits that we have experienced sluggish growth (the worst recovery since the 1930s Great Depression) and a decline of labor force participation (lowest labor force participation since the 1970s.). Look, the guys done well for himself, I wish I was in his position (the money and the power.) Really, who can fault this man for trying his best to keep the wheels spinning in time of crises? It was an interesting experience and I’m glad that I went but in my honest opinion: If this person is the best of the best. If the only solution to bad monetary policy is to continue squeezing the lemon until the next catastrophe.. We’re in trouble…
RSS Feed