Kashkari Weighs In On TARP

Neel Kashkari, who was designated by Treasury Secretary Henry Paulson earlier this month to be the Interim Assistant Secretary for Financial Stability in charge of the $700 billion Troubled Asset Relief Program (TARP), spoke before the Institute for International Bankers yesterday.

Kashkari briefed members of the group on what the TARP will entail and gave notes on its progress. He said that, following the legislation's passing, the Treasury immediately created seven policy teams to oversee various programs:

  • Mortgage-backed securities purchase program. This team is tasked with identifying the troubled assets needing purchase, deciding from whom to buy the assets and the optimum purchase mechanism to use. Kashkari noted the team is designing auction protocols and will work with vendors on the program's implementation.
  • Whole loan purchase program. This team is working with bank regulators to prioritize which types of loan to purchase as well as the best valuation methods and purchase mechanisms to leverage.
  • Insurance program. The team in charge of the insurance program is responsible for deciding the troubled assets insurance structure. Last Friday, the group submitted to the Federal Register a request for public comment to solicit ideas on structuring options, Kashkari said.
  • Equity purchase program. Kashkari noted the group is working on a standardized program to purchase equity from financial institutions, and like the other programs, the equity-purchase program will be voluntary (although "attractive terms to encourage participation from healthy institutions" will be included).
  • Homeownership preservation program. This program will work with the Department of Housing and Urban Development to maximize home retention opportunities while also protecting taxpayers. Kashkari mentioned the program's goal is consistent with the goals of groups like HOPE NOW.

SOURCE: U.S. Treasury Department

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