Neel Kashkari, president of the Minneapolis Federal Reserve Bank has not tread softly in his first 16 months on the job
Kashkari, who was hired by the Minneapolis Fed board in January 2016, tweets, at times irreverently, about economic policy and irks big bankers with occasional criticism of management or his solution for preventing more federal bailouts. He challenges Wall Street, where he once labored, to put more skin in the game. And he’s not shy opining about the implications of certain monetary or fiscal policies, the bailiwick of Congress and the president.
Kashkari has met with impoverished kids and struggling small business people as the Minneapolis Fed contemplates doing more to assist minorities achieve family-supporting jobs. He thinks the Fed can do more to revive gritty neighborhoods.
“I care about public policy and I want to take on the most important economic challenges we face as a region and country,” Kashkari said last week. “That’s what I said to the board when I interviewed for the job. The Minneapolis Fed is an underutilized resource that could have a bigger impact. And this won’t be without controversy. As long as what we do is nonpartisan and grounded in good economic research, let the critics say what they may.”
Kashkari is an engineer who once worked on rocket systems and an MBA who worked for Goldman Sachs. He played a pivotal role at the U.S. Treasury during the depths of the Great Recession. He also was an unsuccessful Republican candidate for governor of California in 2014.
“I enjoyed running,” Kashkari said. “I met billionaires and homeless people and everyone in between. I learned that the vast majority of people are good people. And they care about their neighborhoods, communities and country. I was encouraged.”
And he is not shy about ruffling feathers at financial institutions he oversees.
The Federal Reserve influences interest rates and employment, does research designed to inform policymakers in Washington, D.C., and state capitals, and regulates bank holding companies, from huge JPMorgan Chase on Wall Street to U.S. Bancorp on the Nicollet Mall.
In a rare move for a Fed president, Kashkari blasted the senior management of Wells Fargo & Co. over the consumer fake-account scandal before the board pushed out CEO John Stumpf last fall, five years after the problem surfaced internally. Kashkari also raised big-banker eyebrows when he announced last year the Minneapolis Fed’s preliminary recommendation that the best way to avoid another version of the 2008-10 bank bailout is to raise by 100 percent the capital big banks must hold to cushion against huge losses, to more than 20 percent.
Kashkari has concluded it’s the right thing to do. After all, a bank made him put down 20 percent on his house for security. And he has unique insight. Former U.S. Treasury Secretary Hank Paulsen, a former CEO of Goldman Sachs, recruited Kashkari to Treasury and tasked him with a big piece of the bank bailout. The Treasury invested in hundreds of banks to keep them afloat and stimulate lending. The money was paid back with interest.
However, as some small banks failed, the precedent was set: The government will bail out the biggest banks, those considered to be integral to the national and global economy through the huge electronic-payment systems that weave through the financial world.
“We had to do it, and it was the right thing to do,” said Kashkari. “Let’s not have to do it again.”
Big-bank lobbyists will fight capital-raising regulatory changes. Adding more capital means less lending and investing and restrains profits. Conversely, Kashkari would ease some rules for small banks.
Kashkari was moved recently by a visit to the Northside Achievement Zone (NAZ), a nonprofit that assists low-income families on things ranging from getting kids ready for kindergarten to nutrition and health education and training referrals for out-of-work adults. The North Side boasts the highest concentration of poverty in the Twin Cities. Sondra Samuels, a former businesswoman who leads NAZ, will addressed a Fed conference last week on why blacks are unemployed at twice the rate of whites. Kashkari wants to study what works and spread the word.
“These are enormously important and complex issues,” he said. “I think the Fed has a role.”
Said Minneapolis Fed board member MayKao Hang, CEO of the Wilder Foundation: “Neel is a transformational leader who is willing to tackle important issues we face in our region and across the nation.
“He knows, for example, that if we want to spur growth across the Ninth District, we have to address why we have some of the deepest economic and racial disparities in the country.”