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Since becoming president of the Federal Reserve Bank of Minneapolis
this year, the 42-year-old Kashkari has gone on a media blitz,
visiting nine major media outlets in two days and creating a Twitter
hashtag to promote his view that the biggest U.S. banks should break
up.
On Monday, he will host a symposium at his bank in downtown
Minneapolis entitled "Ending Too Big To Fail," giving fierce critics
of Wall Street's behemoths a platform to present their views.
Becoming the Fed's bad cop is the latest ambitious move in a
high-flying career that has taken Kashkari from Goldman Sachs Group
Inc <GS.N>, to the Treasury Department at the height of the
financial crisis to a run for California governor.
"He's trying to swing way above the weight of the Minneapolis Fed.
He didn't come from California just to rub elbows with ranchers in
Helena," said Dick Bove, an analyst with Rafferty Capital Markets,
referring to the capital of Montana, a state in the Minneapolis
Fed's region.
Kashkari's critics argue he is using the "too big to fail" issue as
a springboard to higher places of authority. He says he's only
working toward prudent financial regulation.
Kashkari's crusade kicked off with a Feb. 16 speech, in which he
compared the aftermath of large bank failures to that of a nuclear
reactor meltdown. He told Reuters a few days later that the
symposium is intended to come up with a plan to prevent big banks
from receiving big taxpayer bailouts, the way they did in 2008.
That's a subject he knows intimately.
At Treasury, he ran the Troubled Asset Relief Program, which infused
$700 billion into banks, automakers and insurers. The bailout played
an important role in stabilizing the financial system during the
crisis, but remains controversial.
Kashkari now says "bolder, transformational options" are needed
beyond a post-crisis regulation that requires big banks to outline
plans to unwind themselves if they fail – known as their "living
wills."
Kashkari launched a social media campaign with the hashtag #EndingTBTF
to promote his event and encourage the public to contribute ideas.
He has amassed 10,300 followers on Twitter, where his retweets of
economic news mix with musings on the superiority of Yuengling beer
and photos of his dogs.
MEDIA MAGNET
Kashkari is not the first Fed official - even within the Minneapolis
Fed - to argue that much more should be done to prevent future
bailouts of big banks.
Gary Stern, who led the Minneapolis Fed for 24 years, was vocal
about the problems created by big banks. Dallas Fed President
Richard Fisher has also called for breaking them up.
There are plenty of critics outside the Fed, too. Democratic
presidential candidate Bernie Sanders bashes Wall Street at every
campaign stop. Even former Citigroup Inc <C.N> CEO Sandy Weill, who
created the so-called "universal" banking model in the 1990s, now
says big banks are better off broken up.
Kashkari, however, may have more of a knack for bringing mainstream
attention to a subject long the purview of policy wonks and
left-leaning politicians.
During and after his time at the Treasury, he was the subject of
admiring media profiles – including a photo spread in the Washington
Post that showed him splitting logs and building a shed at a cabin
in rural California. With his clean-shaven head, thick brows and
intense gaze, he made it into People Magazine's 2008 "Sexiest Man
Alive" issue alongside Prince Harry and actor James Franco.
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As the Republican challenger to California Governor Jerry Brown in
2014, he spent a week on the streets of Fresno pretending to be
homeless and posted a YouTube video about it. "Up against a hugely
popular incumbent, he had to find ways of getting attention," said
Claremont McKenna College politics professor Jack Pitney. He lost to
Brown by 20 percentage points.
The son of Indian immigrants, Kashkari earned an MBA from the
Wharton School at the University of Pennsylvania and joined Goldman
Sachs. In 2006, he followed former Goldman CEO Hank Paulson to the
Treasury Department, where Paulson served as secretary under
President George W. Bush. Between that stint and his gubernatorial
run, he spent a few years at bond-fund giant Pacific Investment
Management Co.
As Minneapolis Fed president, Kashkari oversees a bank with $35
billion in assets in a region where oil, timber, farming and
ranching are among the important industries. Although none of the
U.S. banks considered "too big to fail" are based there, Kashkari
said his staff highlighted the issue as a top priority.
Kashkari's position puts him at odds with peers who have spent years
crafting rules to make the financial system safer. In coming weeks,
a group of regulators is expected to release the latest information
on banks' "living wills."
'CRITICIZE THE MESSENGER'
Regional Fed presidents are arguably less influential than their
Washington-based colleagues. Most vote on monetary policy once every
three years, while Fed governors have a permanent vote on the
policy-setting committee.
Fed presidents typically have even less sway on regulatory matters.
Their bank supervisory powers are largely limited to carrying out
policies set by Washington. When Fed presidents have raised alarms
on regulatory issues, they have rarely budged national policy.
Ten current and former regulators, bankers and lobbyists who spoke
to Reuters said they believe Kashkari's "too big to fail" campaign
is motivated by his career ambitions. They asked not to be named
because they did not want to damage relationships with Kashkari.
In his February interview with Reuters, Kashkari said he had no
motive beyond responsible regulation. On Friday, he said critics are
trying to distract from the real issues he is addressing at Monday's
event.
"The Wall Street critics can't argue with me on the substance of
too-big-to-fail, so they criticize the messenger," he told Reuters
in an email. "I welcome their criticisms because they are an
implicit admission that I am right."
Kashkari has plenty of supporters, too. They believe his experience
in banking, regulation and politics makes him a credible advocate.
"As a moderate, he may be offering some sort of aid and comfort to
the notion of breaking up the banks," said Jim Angel, a professor at
Georgetown University's McDonough School of Business.
(Additional reporting by David Henry and Ann Saphir; Editing by
Lauren Tara LaCapra, Carmel Crimmins and Mary Milliken)
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