Treasury's Interim Head of Rescue Op Establishes 7-Part Policy Team
The U.S. Treasury is implementing a "strong, decisive and effective program" including seven policy teams committed to battle the unpredictable credit crisis, said Neel Kashkari, interim head of the new Office of Financial Stability, which will oversee the $700 billion Emergency Economic Stabilization Act of 2008.
"While the permanent team is being identified for tomorrow, we are tapping the very best, seasoned, financial veterans from across the government to help launch the program today," Kashkari said at the Institute of International Bankers in Washington D.C. on Monday morning.
Kashkari, who called credit markets frozen, said transparency in the program is necessary for the program to be effective. He said "taking aggressive steps to manage potential conflicts of interest is essential because firms with the relevant financial expertise may also hold assets that become eligible for sale into the TARP."
Kashkari said the Treasury had been using its full resources to ensure the program's success and has created seven policy teams to deal with different aspects of the rescue.
A mortgage-backed securities purchase program will identify which troubled assets to purchase, from whom to buy them and which purchase mechanism will best meet policy objectives.
A whole loan purchase program will work with bank regulators to identify which types of loans to purchase first, how to value them, and which purchase mechanism will best meet policy objectives.
An insurance program has been designed "to purchase equity in a broad array of financial institutions," Kashkari said. The program will be voluntary and will encourage firms to raise private capital to complement public funding.
A home ownership preservation team has been established for mortgages and mortgage-backed securities. "This goal is consistent with other programs - such as HOPE NOW - aimed at working with borrowers, counsellors and servicers to keep people in their homes," Kashkari said.
A team is working on limits to executive compensation for participating firms.
Finally, an oversight committee will participate in the accounting process and the creation of a Special Inspector General, with thorough reporting requirements.
He also made the case for why Main Street should care about the program's success. "Every American depends on the flow of money through our financial system. They depend on it for car loans, home loans, student loans and their individual family needs."
Kashkari, a former vice-president at Goldman Sachs, is known to be a close adviser to Secretary Henry Paulson.
By Patrick McGee and edited by Stephen Huebl
©CEP News Ltd. 2008