The $700 Billion Man With an Engineer's Mind
Thursday, October 9, 2008
Many of the complicated securities at the center of the subprime mortgage crisis were designed by mathematicians and physicists, and now the U.S. government has tapped an aerospace engineer who used to design NASA satellites to start unraveling them.
He is Neel Kashkari, the product of a Midwestern family that thrives on complicated subjects. His dad was an engineering professor. His mom: a pathologist. His sister works with infectious diseases. And now Kashkari, who abandoned satellites for Wall Street and then a government job, is engineering the $700 billion bailout of the nation's banking system.
"As an engineer, what I loved was tackling problems that had never been thought about before," said Kashkari, appointed this week as the Treasury Department's point man to launch a program for buying troubled housing assets. "I find my work now in policy brings me back to those days. Although we have had credit crises in the past, this one is very different, and so it brings me back in the way we have to creatively tackle it."
Kashkari, now known as the $700 billion man, is just 35 and a two-year veteran at the Treasury. He is helping steer the country through an economic crisis after originally thinking that he would spend his life building gizmos. In graduate school, he designed a solar-powered car that was driven across the country. That may not seem like the typical career path for someone shaping the economy, but the world economic system, with its derivatives and intricate securities and hedges and default swaps, has grown complicated enough that Kashkari and people who have worked with him view his engineering experience as a plus.
In the housing run-up, investment firms looked for mathematicians to design ever more complex ways to turn risky investments into more-palatable securities.
"There's a lot to be said for his background," said Al Hubbard, President Bush's former National Economic Council director who has worked closely with Kashkari. "I can assure you that he will understand all these complex securities. There's nobody any smarter than he is."
Mike Heid, a co-president of Wells Fargo Home Mortgage who has worked closely with Kashkari on the housing crisis, said "thinking about narrow issues, while still thinking about the broad situation, and keeping it all connected in your head -- there's an art form to that that I've seen from him."
Kashkari is the son of Kashmiri immigrants, and he grew up in Stow, Ohio, a small suburb of Akron. He attended Western Reserve Academy, where he wrestled and played football. He was fascinated by engineering and was also a political junkie, sitting next to his father on Sundays to watch the talking heads discuss the news. He earned his bachelor's degree and a masters in engineering from the University of Illinois.
His first and only job in engineering was working on satellite technology at TRW, a Cleveland company later bought by Northrop Grumman. But when he looked into his future, he didn't like what he saw: several more years of grad school for a PhD, then a lifetime in research and development. He decided to go into business and focus on technology, earning his MBA from the Wharton School at the University of Pennsylvania and landing a coveted investment banking job with Goldman Sachs.
His interest in policy and politics lingered, so he made an appointment to talk with Henry M. Paulson Jr., a former White House official who was serving as Goldman's chief executive. Paulson, Kashkari said, encouraged him to pursue government work if the right opportunity arose. A few months later, Paulson was named Treasury Secretary. Kashkari picked up the phone.
"Remember that conversation we had?" Kashkari asked Paulson. "Well, if you are putting together a team, I want to come with you." They started at the Treasury on the same day.
Kashkari's first assignment was energy issues. He and Hubbard worked closely on developing Bush's "Twenty in Ten" energy plan, which was announced in the 2007 State of the Union address. "He was a very key player on that policy," Hubbard said. "He did a lot of important analysis on what was possible in terms of moving to alternative energies."
When the housing crisis began to unfold last year, Paulson tapped Kashkari to work on the issue, and the two became close. Kashkari was the Treasury's point man on the formation of the Hope Now Alliance, a partnership among mortgage lenders, credit counselors and investors to help at-risk homeowners avoid foreclosure by modifying mortgages.
Since then, Kashkari has played a role in almost every facet of the Treasury's response to the subprime mortgage and credit crises, including working through several nights to negotiate the bailout deal with Congress, leaving for his home in Silver Spring only after most everyone else in the region had fallen soundly asleep several hours before. His wife, Minal Kashkari, is an engineer for Lockheed Martin, which is based in Bethesda.
News of the bailout plan has done little to calm investors or free up credit. But that's partly because Kashkari is just now getting to work figuring out which troubled assets to purchase and whom to hire to oversee the investments. His role, while important in setting up the program's direction, is temporary. Paulson has said he wants to work with the president-elect in November to find a permanent appointee.
A few weeks ago, Kashkari had coffee with Helen Gregory, the director of advancement for Western Reserve Academy. Gregory's son and Kashkari were in the same class, and she hadn't seen him since graduation. "He was modest about his role and what he's working on," Gregory said. "He wasn't sitting there bragging about what he's doing. I respected that. It's easy for people to spout out what they are doing to impress you. He was very low-key."
But at the same time, Gregory said, "I felt this weight of the world on his shoulders."