Bailout Role Elevates U.S. Official

For months, as Treasury Secretary Henry M. Paulson Jr. traveled to Capitol Hill to testify about the unfolding financial crisis, he has been shadowed by a man with a shaved head and intense eyes who many assumed was a Secret Service agent.

But much of the political and financial world was surprised to learn this week that the man was Neel T. Kashkari, 35, a former Goldman Sachs investment banker whom Mr. Paulson has tapped to oversee the $700 billion bailout effort as interim assistant secretary for financial stability.

Mr. Kashkari, who has only six years of experience in finance and government, said he knew he seemed young to be shouldering so much responsibility for the world’s financial stability. But, he said, Mr. Paulson will oversee every step he takes.

“This project is Secretary Paulson’s highest priority,” Mr. Kashkari said in an interview on Wednesday. “He is all over it. Our team is just executing his strategy.”

Even so, some experts question whether Mr. Kashkari is up to the job.

Samuel L. Hayes, an emeritus professor of finance at Harvard Business School, said Mr. Kashkari will face tremendous pressures. If the Treasury Department pays too little for troubled loans, that will not help banks’ balance sheets, but if it pays too much, it will attract fierce scrutiny from members of Congress and others convinced that the bailout is a giveaway to the rich, he said.

“It’s amazing to me that a guy who is only six years out of business school has been given this kind of assignment, because it would be an enormous challenge for someone with 30 years of experience,” Mr. Hayes said.

Adding to the pressure, critics are already raising questions about potential conflicts of interest in the government’s plan to hire large financial firms to handle the transactions.

More than 100 asset managers submitted bids to Mr. Kashkari on Wednesday, seeking to manage parts of the portfolio that the Treasury Department will eventually acquire, according to two industry representatives who have been in contact with Treasury officials. Goldman Sachs was among the bidders but it offered to provide its services free of charge. Mr. Kashkari declined to talk about the bids.

Mr. Kashkari and Mr. Paulson have worked closely together since leaving Goldman Sachs and arriving at the Treasury Department on the same day in July 2006 — even though they hardly knew each other before then.

Mr. Paulson was based in New York as the investment bank’s chief executive. Mr. Kashkari worked in San Francisco, where he was one of the firm’s many hundreds of vice presidents — a title given nearly automatically to associates who have been there several years.

In early 2006, Mr. Kashkari said, his supervisor at the time helped him set up a meeting with Mr. Paulson to talk about his experience as an official in the Nixon administration and Mr. Kashkari’s interest in government service.

Mr. Kashkari, a Republican, said Mr. Paulson was encouraging. A few months later, when President Bush asked Mr. Paulson to serve as Treasury secretary, Mr. Kashkari said he called him, reminded him of their conversation, and asked for a job.

Mr. Paulson hired him as his special assistant, a kind of handyman position for which he took on a series of projects that caught the secretary’s interest. He shared a cramped office with another junior official.

For Investors

• Why Going Into Cash Isn't a Good Idea
• Where You Can Put Your Cash to Work
• Short and Long-Term Stock Picks: Doll
• What Investors Should Buy Now: Top Strategist
• Short Sellers Are Back...So?
• A Bear Market Until 2011: Analyst
• Financial Psychologist: Fear, Greed and Bull Traps

Mr. Paulson soon put him in charge of an effort to have mortgage holders voluntarily change financing terms in order to prevent foreclosures. The program met with only mixed success, but a Treasury spokeswoman said that it was never intended to be a “silver bullet,” given the complexity of the overall problem.

This summer, Mr. Kashkari was promoted, winning Senate confirmation to be assistant secretary for international economics. Among other things, he has focused on working with American banks toward adoption of a less-risky system of mortgage-based bonds that is popular in Europe. And he moved to a larger office, with room for sofas and photos of his favorite ski slopes around Lake Tahoe.

As the crisis unfolded in recent months, Mr. Kashkari worked long hours alongside Mr. Paulson, helping to deal with the bailouts of Fannie Mae , Freddie Mac and the American International Group in turn, while working in secret on what became the $700 billion rescue package — a project code-named Break the Glass because it was to be used only as a last-resort emergency measure.

CONTINUED : Scrutiny will be and should be intense.

---

1 | 2 | Next >