Below is a video from a talk given by Neel Kashkari from the American Enterprise Institute (of all places!) on Sept. 19th 2008.. Kashkari has just been appointed by Paulson to head up the $700 Billion dollar bailout. Turns out, in the below video he is suggesting the use of a financial instrument used in Europe apparently to replace mortgage-backed securities with a recycled version for our market called "covered bonds." He proffers that it's not a panacea but it creates transparency and provides more liquidity for investors. Furthermore, he states that there should be no implicit government guarantee when it comes to covered bond legislation here in the U.S. in the near future.
Recommend -- this is huge! Keith and company need to report!
Great, all we need is another "new" financial instrument to take us even deeper into financial hell. Kashkari's distressing comments start at approx. the 11-minute mark
Pay close attention to the panning of his audience. They are either asleep or just plain confused.
He also emphasized a "best practices approach" which would include geographic diversification of a covered bond. This would provide covered bond investors with greater transparency of where their securities are vested and a confidence that their securities aren't exposed to any one particular market (e.g. Las Vegas, NV.).
This sounds really great on paper and on powerpoint but the last thing we need is another new market to be introduced to our already downtrodden financial environment.
In the video, Kashkari, explicitly states during the QA session that he is indeed a Free Market Republican.
I thought we were providing 700 billion to repair the market and not create new ones. Nonetheless, most of the AEI audience seems quite skeptical of his "best practices guide" towards creating a new covered bond market. Neel Kashkari may be a very smart 35-year old man but placing such a person in-charge of 700 Billion Dollars who is advocating a new instrument is another risky venture we cannot afford to make.
Let's hope that Schumer and Dodd recognize this early.