Neel Kashkari, who oversaw the government’s bank bailout in 2008, spoke to us about running for governor of California.
Kashkari is running as a Republican and his platform is focusing on just two key issues — jobs and education.
He considers himself to be a moderate Republican. His focus isn’t on social issues.
“What the Republican party is being cast as is not why I’m a Republican,” he said in a telephone interview with Business Insider. “It’s not the Republican party I believe in. I’m a Republican because I believe economic growth is the most powerful force to lift people up. I believe that the Republicans should be the party that’s fighting for the middle class and fighting for the poor. Our solutions are not more welfare. Our solutions are a good education and a good job.”
We spoke to Kashkari about TARP and his time at Goldman Sachs among other topics.
Kashkari was appointed by Treasury Secretary Hank Paulson to oversee the Troubled Asset Relief Program that bailed out the banks during the height of the financial crisis. He told us his experience working with both sides of the aisle on TARP will help him in his gubernatorial run.
After the Treasury, Kashkari worked at PIMCO as the head of global equities. He also worked at Goldman Sachs in San Francisco from 2002 until 2008.
Below is a transcript from our Q&A (Note: This has been lightly edited for clarity):
BI: How do you think your experience with the Treasury helps you while running for governor in California?
NK: The TARP is the best example in modern American history of Republicans and Democrats coming together to tackle a terrible, terrible crisis. And I think that experience of getting Republicans and Democrats to work together will help me get Republicans and Democrats to work together in Sacramento. We have a crisis in California — We have 24 per cent of the state living in poverty. We have 17 per cent of the state in need of work. And we have schools that are ranked 46th. And right now, the status quo is devastating for millions of California families. And what I want to do is bring that same — you know, the experience of the financial crisis with it, you don’t break the back of a crisis with small policies. You’re required to use overwhelming force. I want to bring that same overwhelming force and break the back of the crisis that’s been hammering California families.
BI: I’m looking at the years you were at the Treasury… Some people might say ‘That’s not many years in public service.’ How would you answer people if they ask you about not having much experience as a political leader?
NK: Well, three years battling the worst economic crisis that our country has faced since the Great Depression, I think, is great training to tackle the crisis that’s hammering California families.
By the way, there are a lot of other folks who ran for governor as their first elected office whether it’s Ronald Reagan or Mitch Daniels or President George W. Bush or Mitt Romney. There are a lot of examples of very successful governors for whom that was their first elected office.
BI: How about folks out there who might criticise your experience with the Treasury and say that it was just about bailing out the banks?
NK: We hated having to intervene and use tax payer resources. We wanted to let all the banks fail because they deserved to fail. No one owed them anything. But when we realised we were facing a Great Depression scenario where literally your ATM might not work , literally might not be able to cash your paycheck, that’s when we realised we had to intervene. But, if we were going to intervene, we were going to do it in a way that protected the taxpayers. And that’s why I’m really proud of the fact that the program that I ran while we deployed $US422 billion dollars we got every dollar back and we even made a $US13 billion profit for the taxpayers. There’s no program in American history that’s ever done that.
BI: Can you discuss what sort of strengths you gained during your experience whether it was at Goldman Sachs, the Treasury or PIMCO? What sorts of values have you gained in your experiences?
NK: One of the things that was critical in Washington was that we worked arm-and-arm with the legislative branch, so executive branch and legislative branch working together. We focused on the biggest crisis facing our country and we said, ‘We will work with anybody of any party who is committed to tackling this crisis’ and we did. So, I worked with Judd Gregg on Republican side and I worked with Barney Frank on the Democratic side. We put politics aside and said, ‘Let’s do what’s the best thing for our country’. And we got Republicans and Democrats to work together and to put politics aside. So that’s a critical skill that I think is directly relevant to Sacramento.
BI: Are you still keeping in touch with some of your former colleagues as you run? Have you talked to Hank Paulson or Bill Gross? And have they given you advice? If they have what sort of advice have they given you?
NK: Hank [Paulson] is a big supporter of mine…He’s been a donor to my campaign, which I really appreciate. Hank is a spectacular leader. He’s somebody who’s so laser focused on tackling problems, will work with anybody, how to get things done and focused on results. I learned a tremendous amount from him. He continues to be a mentor and friend to me. And others around the country who have given me a lot of advice. Mitch Daniels has given me a lot of advice both on politics, but also on economic policy. Jeb Bush has given a lot of advice on education policy. You know, I don’t have all the answers, so what I do is I tap into all the experts around the country to get their best ideas and figure out what we can bring to California.
BI: Is there anything specific in terms of advice that has really resonated with you?
NK: One of the things that’s critical is getting out there and really letting people get to know you in a way that most candidates don’t do. So when Mitch Daniels ran for governor of Indiana he traveled all around the state and he never stayed in a hotel. He would spend the night in some random Indiana family’s home as a way to let them genuinely get to know him and him to get to know them. When Jeb Bush ran for governor of Florida he said education is going to be my signature issue. He set a goal of visiting a hundred schools in Florida. He ended up visiting 250 schools in Florida. But again, it demonstrated a real genuineness and authenticity. And so I’m using those as role models for me as I’m travelling all around the state going in some of the poorest communities in California…whether it’s visiting and attending service at African-American churches in south central L.A., visiting food banks, homeless shelters, etc. getting out there and really letting people get to know me and me get to know what’s happening on the ground in communities across California. That’s been critical, but that’s something that I learned from Jeb Bush and Mitch Daniels that they did very effectively.
BI: I noticed that your campaign is focusing on education and jobs and not so much social issues. Can you speak about that.
NK: My platform is very simple — jobs and education. Because I feel like with 17 per cent of Californians in need of work, millions of Californians are struggling, a lot of kids are graduating from college with thousands of dollars of student loan debt and no jobs and that’s a huge problem. Then, with education we’re ranked 46th in the country. I grew up in a middle class family. My family was not wealthy, but I did have one big advantage growing up and that is my parents were educated and they insisted that I got a good education. Because I got that education, every opportunity has been opened to me and that’s just not true for millions of Californians today. I feel like if we do these two things, we unleash the private sector to create good jobs and we put people back to work and we fix the schools so kids are getting a good education. If we do those two things, most of the other problems in our state become a lot easier to solve. We’ll have less crime, fewer kids getting on drugs, fewer kids entering gangs. Our budget will be much much stronger because we’ll have fewer people who need support from welfare and many more taxpayers in the state. To me, we can’t do everything at once, so let’s focus on the most important issues facing the state and that’s jobs and education.
BI: What are you thoughts on Wall Street now today since we’re past the financial crisis whether it’s insider trading or the regulations?
NK: The insider trading is outrageous. It’s fraud. Insider trading has been going on for a long time and I don’t think the Justice Department is being anywhere near aggressive enough in pursuing these cases… The U.S. District attorney has a record of…79 and 0. But he’s not going after the hard cases…Why isn’t Steven A. Cohen, why isn’t he prosecuting him for criminal fraud or criminal insider trading? How is it possible that all of the underlings are guilty, but the guy whose name on the door he didn’t know. This is like a bad mob where all the street thugs are guilty, but the mob boss didn’t know what’s going on. So the DOJ needs to be much more aggressive and willing to take some career risk at losing some cases if that’s what it means. Because if they’re not prosecuting these guys, yeah they preserve their perfect track record, but then the guy’s getting off scot-free and that’s ridiculous. To me, I think the DOJ needs to be much more aggressive in pursuing the insider trading and fraud cases. Insider trading and fraud undermine everyone’s confidence in the whole system. That does damage for all of us.
BI: Anything with regulations?
NK: I think that the Dodd-Frank bill is very well intentioned. I think it’s going to be years before we know the full implications of that. I think the one thing that’s very good is the banks have more capital today. That’s the buffer against bad things happening. Banks should have more capital so I’m happy about that. Whether we’ve got the rest of the regulations right, I don’t know yet. Unfortunately it’s probably going to be years before we know it. We just have to remain vigilant. We can’t let ourselves fall into a false sense of security.
BI: What would you say to people who criticise you for having worked at Goldman in the past?
NK: My job. I was based in California. My job was to help start up companies in California raise money and pursue strategic transactions. So a start up would come to us and say, “Hey, we want to build a new plant. We want to expand and hire a lot of people.” My job was to help them raise that money. What I did in California is very, very different than some of the misdeeds that were going on in New York. And, I’m proud of what I did in California because I helped California businesses compete globally. So I hope people will give me the chance to explain what I did and look at my record for themselves and draw their own conclusions.
BI: Can you talk to me about the moment when you decided, ‘I’m going to run for governor in California’? What was it that made you want to do this.
NK: The truth is I first started thinking about this after the 2012 presidential election after Governor Romney lost. I was a supporter of his. I thought he would have been an excellent president. In California, the Democrats took over a super majority in both the legislative bodies — the assembly and the senate. And so I just looked at this as someone has to be willing to fight and turn this around. What the Republican party is being cast as is not why I’m a Republican. It’s not the Republican party I believe in. I’m a Republican because I believe economic growth is the most powerful force to lift people up. I believe that the Republicans should be the party that’s fighting for the middle class and fighting for the poor. Our solutions are not more welfare. Our solutions are a good education and a good job. For me, this is also about rebuilding the Republican party around a very positive economic platform, a very inclusive message that’s bringing all ethnicities into the Republican party and also socio-economic groups into the Republican party. And so, that’s when I started thinking about it and then I spent a year meeting with families across the state that are struggling, meeting with Republican across the state to share my ideas and get their thoughts and also meeting with potential donors to see if we will be able to raise the resources to run a competitive campaign. And it was a culmination of those three areas of work that finally lead me to make the decision of ‘Yes, this makes sense. I’m going to run for governor.’
BI: How do you think you’re going to be able to compete with the current governor, Jerry Brown?
NK: Well, Governor Brown is certainly going to have far more resources than we are. But, the facts are unfortunately on our side. 20-four per cent of Californians live in poverty. Governor Brown has no answer. Seventeen per cent of Californians need work. Yet, Governor Brown has no answer. Our schools are ranked 46th. Governor Brown has no answer. And the people of California feel the pain because they are the families who are struggling. They’re the ones worrying about keeping a roof over their head, keeping food on the table. I’ve been visiting food banks that are doing robust business because families don’t have jobs. I want to put every food bank in California out of business because we put people back to work and they don’t need to turn to those food banks for their dinner. So if you look at Governor Brown’s re-elect numbers, he’s pretty popular. 50 per cent of Californians like him and approve of him so to speak, but only about 1/3 of California voters think he should be re-elected and that’s because families are struggling. They know they’re struggling. They know the state is not back. And every time he pats himself on the back for solving all the problems it rings hollow. It’s as though he’s tone deaf of what people on the street are really feeling and I want to be a voice for all of them.