Neel Kashkari, the man who runs the American banking system (a.k.a. the Interim Assistant Secretary of the Treasury for Financial Stability), came to New York today to speak to a bunch of business school students at the annual Wharton Finance Conference. The most interesting information that I got out of sitting in on his speech was that just seven years ago Kashkari was one of the organizers of the conference as a student at the Wharton School. That’s right: The guy in charge of righting our financial mess got his MBA in 2002.
Kashkari did work as an R&D engineer at TRW before going to business school, so he’s not a child. He also seems pretty smart. Smart enough not to say anything all that newsworthy in his speech. But a couple of his statements were at least interesting:
On getting banks to do something with all that capital Treasury has injected them with: “If they don’t do anything with it, their return on capital will decrease. We think they’ll face pressures from shareholders to do something with the capital. At the same time, it’s not going to happen overnight. We’re still in a period of unprecedented lack of confidence.”
On the controversy over mark-to-market accounting: “People are pointing fingers at mark-to-market accounting, but I haven’t heard of any better solution than mark to market.”
On whether the executive-pay restrictions on financial institutions participating in the bailout have any teeth: “The executive compensation provisions absolutely have teeth and are meaningful,” he said, but then went on to explain that there are three sizes (or sharpnesses) of teeth. For institutions in trouble, “we’re going to set very strict executive compensation requirements.” The banks participating in the current capital injection are a “middle case,” and Treasury is trying to balance the requirements of the bailout bill with a desire not to scare banks away. And finally, institutions that simply sell assets to the government are subject only to minimal restrictions.
On where things stand with that asset-purchase program, which was initially billed as the core of the bailout: They’re working hard on it, he said, but “I can’t give you a specific date.” Also, Treasury Secretary Paulson and Fed Chairman Ben Bernanke “will determine which tools to use.”
On regulatory reform: “We will see a new regulatory system emerge, but I can’t say whether it will be one year from now or five years from now. In terms of my job, I’m just trying to get through to January 20.”