Who is the man behind the curtain? The selection of Neel Kashkari as the new President of the Minneapolis Federal Reserve is fascinating for a lot of reasons. It’s especially important to those of us who live in the district, of course, but this is not any ordinary position. Kaskkari is taking over for Kocherlakota, the outgoing President who resigned last June – leaving the Fed with one less relentlessly “dovish” member of the Fed Open Market Committee (FOMC).
Who is this new guy? How was he chosen?
The whole process gives us a peak behind the curtain and raises a series of questions about the new, more politically active Fed. Kashkari also brings a new personality and well documented series of biases as an data-loving engineer who is, by all accounts, a genuinely nice if hard-driving guy.
The position Kashkari is coming into is one of the most important in the world. As one of the twelve Federal Reserve Presidents, he joins the FOMC at a time when the debate about the proper Fed Funds Rate is more intense than it usually is. His job will be to oversee the economic health of the Minneapolis District, one of the most vibrant in the US today.
The process has given us some insight on landing this gig, too. The Board of Directors of the Federal Reserve does the selection – with the financial people sitting the process out. It fell to the Chair of this board, MayKao Hang, to announce the pick. She is the head of the Wilder Foundation, a local non-profit with an interesting tie to my house, and was once a refugee.
Kashkari is an interesting pick for many reasons. Most importantly, as a Republican candidate for Governor of California he has record as an active politician – once something which would rule out a job at the Fed. In 2014 Kashkari was beaten badly by Jerry Brown, 59-41, in a campaign that stressed economic development and a platform of social equality which was more libertarian than the national party.
I’m a free-market guy. I learned the limits of free markets in the intensity of the 2008 crisis, however. I still lean that way, but I’m also more humble. Ideology is great, but data is better.
That’s far from the most interesting aspect of this 42 year old son of Indian immigrants. His first degree was in Mechanical Engineering, landing him a gig with TRW as a contractor for NASA. For some reason he turned to the dark side and earned his degree in finance from Wharton, which led to a job with Goldman Sachs.
His ambition took him along with Treasury Secretary Hank Paulson, eventually leading to Kashkari’s most important role – the director of the Trouble Asset Relief Program (TARP). He was able to steer this political football to success in its main mission as an economic stabilizer but also got it to turn a small profit from the interest paid.
After that, he went to bond firm PIMCO where he worked alongside legendary Bill Gross.
With one Hell of a resume, you have to wonder what Kashkari is going to be like as he settles into the community that he’s now charged with being a big part of its financial health. It seems unreasonable that he will charge into a new program of community assistance like the one set up by St Louis Fed President James Bullard, given his background, but we won’t know until he settles in.
In the meantime everyone is going through the lengthy public record left by Kashkari, including his over 6,000 tweets. The only gem found so far is “Falling labor force particip makes the headline (unemployment) rate meaningless” in response to another tweeter.
How many electrons has Barataria killed going over that topic?
No matter what, the replacement for Kocherlakota probably opens the door to less jockeying over whether interest rates should rise and more questions about where they should be given our current economic health. He’s unlikely to do anything unusually aggressive but if the data is going to do the talking rates won’t stay low much longer.
Right now, everyone is laser focused on when is the Fed going to raise interest rates and start the normalization process, for good reason. But there are a whole host of economic challenges we face as a country, and I want to pay attention to all of that.
The man behind the curtain has an unusually colorful and mixed background – and is unlikely to stay hidden. This is big news for Minneapolis and for Fed watchers all over the world.
I think so! He’s kind of the anti-Kocherlakota in some ways.
But will he vote to raise rates?
We don’t know yet. My hunch is that he will, or at least be more eager than Kocherlakota. But Kashkari doesn’t get to vote as a member of the FOMC until 2017 anyways.
This is interesting! Who else is on the board? How responsive are they to the community? Who else applied for this job?
I have not found yet who they considered for the position. The Board of directors is here: https://www.minneapolisfed.org/about/board-of-directors
Note that only the “Class B” and “Class C” members were voting on the new President. They generally represent businesses in the area, but Hang does not.
Hopefully he has no plans of eating turkey for Thnxgiving day. No it is not called Turkey day.
Plus he is follicularly challenged.
Hopefully Melissa Benoist is on his staff. Dont deny that you like Melissa Benoist.
Who is Melissa Benoist and should I know her? 🙂
Melissa Benoist plays Supergirl, woman of steel. She is 27 years old. : ) ; )
Well, then – hardly a “girl”. 🙂
She has the strength of a Republican. Like Paul Ryan of Janesville Wisconsin and John McCain of Arizona. Mitch McConnell of Kentucky.
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