NEW YORK–A former Treasury Department official who helped oversee the bailouts of big banks a decade ago who is now a regional president of a Fed bank is proposing those same big banks be broken up.
Neel Kashkari, who in 2008 represented the Treasury Department in negotiations to have JPMorgan Chase & Co. take over Bear Stearns following its collapse, also oversaw the $700-billion Troubled Asset Relief Program, or Tarp, under President George W. Bush.
Kashkari, who is now president of the Federal Reserve Bank of Minneapolis, recently said during an interview that the “bailouts, while the right thing to do at the time, violated a core American belief: if you take a risk, you bear the consequences. A lot of political division we experience is still a byproduct of the financial crisis and the fundamental unfairness.”
Kashkari told the Wall Street Journal those experiences have changed some of his views, and while he remains a supporter of free markets, “markets can make mistakes, sometimes large, costly ones. We do need some regulation to protect against free market excesses such as those that lead to financial crises.”
According to the Journal, Kashkari believes rules created to prevent taxpayer rescues of the financial system have not gone far enough, and that “too-big-to-fail” banks remain ticking time bombs.
The Fed Bank president has called for new capital requirements for the largest banks that he said would then “face increased pressure to consider breaking themselves up.” It’s a position that has put him at odds with many on Wall Street.
Kashkari has also issued warnings over rising interest rates, with the Journal noting he voted against all three 2017 rate increases—twice as the lone dissenter—arguing inflation remained short of the Fed’s 2% target. He has more recently said that a pickup in wage growth could alter his outlook.