Well, that’s one way of keeping your name in the headlines…

Much has been made this week about comments by new Minneapolis Federal Reserve president Neel Kashkari calling for big banks to be broken up or transformed into utility-like entities. The merits of Kashkari’s ideas aren’t really worth dissecting because it is far more appropriate to simply chuck them in the old “ain’t never gonna happen” file. After all, if the financial crisis itself wasn’t enough to drive policymakers to break up the big banks, then some comments nearly a decade later from the Land of 10,000 Lakes isn’t going to do it either.

The evolution of Kashkari himself? Now that is a fascinating story. What could make this creature of Wall Street turn on his own former colleagues? Why would the savior of the big banks go after the big banks?

Kashkari the Savior

Kashkari first hit the national spotlight when he was tapped to run the Treasury Department’s Troubled Asset Relief Program. At a time when the global economy was collapsing, Main Street businesses were suffering and people were losing their homes, Kashkari signed on to dole out money to big banks. To say that accepting such a position was wrought with reputational risk would be an understatement. According to Bailout, the excellent book by former SIGTARP Neil Barofsky, Kashkari tackled his job with great vigor; doing everything he could to kari kash to Wall Street – and not Main Street — as quickly as possible. And yet Kashkari was shocked (shocked!) at the harsh treatment he received from in the media and on Capitol Hill. This was the first sign that Kashkari’s perception of reality and the role he plays in it was askew. But wait, there’s more.

California Dreamin’

After TARP, Kashkari’s high-tailed it to the Sierra Nevada mountains in California so he could “detox” from Washington. This is where an epic feature in the Washington Post found him chopping wood months later. Kashkari had constructed a list of all the things he wanted to do to get over his Beltway PTSD:

  1. Buy Shed
  2. Chop Wood
  3. Lose 20 Pounds
  4. Help Hank [Paulson] Write his Book

If the goal of Kashkari’s forest sabbatical was to move past the horror of his whopping seven months atop TARP, it is a bit peculiar that his last step would be to help his boss rewrite … uhhh … re-live the history of it.

When Kashkari finally came down from the mountaintop, he promptly took a job at PIMCO – a firm that benefited rather handsomely from the bailout efforts of the Treasury Department. As President George W. Bush once said upon exiting the White House, perhaps it was time to “replenish the coffers”.

After a few years working at PIMCO, which is headquartered in Newport Beach, California, Kashkari decided it was time for change. And just as anyone who disdains the glare of the spotlight would do, he decided to enter politics.

(Who in their right mind trades in the spectacular Sierra Nevada mountains and/or the pristine beaches of Orange County for the sprawling flatness of Sacramento? Sacramento!?!?)

Not Quite Ronald Reagan

The general public has neither forgotten, nor forgiven policymakers for the Wall Street bailouts. But somewhere in the political calculus in Kashkari’s mind, he didn’t think his TARP past would stop him from being elected governor of the State of California. And so it was that despite a massive, 10-1 funding advantage powered in no small part by executives from the world of finance (more on this later), Kashkari struggled to defeat a tea-party Republican in California’s nonpartisan blanket primary.

“The Gipper” Kashkari is not. In fact, one of the most memorable aspects of Kashkari’s campaign was the unintentional comedic value of his website. Unfortunately the site is no longer live, but let’s just say there were a lot of photos of Kashkari and his dogs. A LOT.

In the general election, Kashkari was beaten soundly by incumbent Democratic Governor Jerry Brown.

Follow the Money … or Lack Thereof

Kashkari barely had time to recuperate from the campaign trail before he was tapped to take over the Minneapolis Fed. Given his time at Goldman Sachs, the Treasury Department and PIMCO, the Minneapolis gig left Kashkari well-positioned to protect the interests of major financial institutions.

But then he opened his mouth on Tuesday.

Why go after the big banks?

One possible answer lies in the fundraising records from his gubernatorial campaign. Bankers at Goldman Sachs opened their checkbooks for their former colleague, but that isn’t really a surprise because that’s what friends are for. No, the surprising thing about Kashkari’s fundraising is how little of it came from financiers at other major U.S. financial firms. According to the records, his former colleagues at PIMCO chipped in a whopping $600.

Smaller asset managers and regional banks like Bank of the West and Bank of California donated much more than any major bank aside from Goldman. Those smaller banks wouldn’t mind seeing some of their bigger competitors broken into pieces. Not to mention, Bank of the West parent BNP Paribas would certainly say merci beau coup if the downsizing of major U.S. banks meant they were forced to shrink their European footprint.

But maybe – just maybe – the time Kashkari spent with his campaign donors shifted his view on the issue of too-big-to-fail. Maybe his time shaking hands with regular folks on the campaign trail opened Kashkari’s eyes to the Main Street ramifications of Wall Street practices.

The whipsaw nature of Kashkari’s aspirations makes him hard to pin down on just about any issue. But that’s okay because maybe the Federal Reserve system needs a loose cannon.

The idea of politicians running the Federal Reserve strikes chills in the hearts of economists around the world. But what about failed politicians?

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