On Tuesday, President of the Federal Reserve Bank of Minneapolis and former Assistant Secretary of the Treasury for Financial Stability Neel Kashkari held a Q&A with members of the Financial Planning Association of Minnesota in Golden Valley. Kashkari was the first Assistant Secretary of the Treasury for Financial Stability under the Bush and Obama administrations.
During the Q&A, Kashkari voiced his views on bank restructuring, and he also shared his personal experiences with trying to obtain a mortgage, and the frustration caused by the mortgage lending process. He stated that higher capital for big banks and relaxed policy on smaller banks may provide relief for banking institutions.
“If we can make sure we’ve taken care of the biggest banks and the risk they pose, I think we could relax a lot of regulations on just about everybody else,” said Kashkari, “so that people are freer to run their businesses, to make the investment decisions they believe are right, we all then would have confidence that the biggest banks are safe, and not so micromanaged.”
According to Kashari, the Troubled Asset Relief Program wasn’t about protecting the banks, it was about protecting the people from the inevitable fallout.
“I was the guy who bailed out the banks.” he said. “We hated it. You know, we were a free market Republican administration. We wanted to let the markets work and let all these banks fail. The problem was if we allowed the financial system to collapse, instead of the great recession, we would have been looking at the great depression.”
Kashkari spent some time during the Q&A discussing the recession. He remarked that in 2006, it was about “time for a financial crisis,” since it had been eight or 10 years since the last crisis. He also stated that a national housing bust was never on the radar, and that a “nationwide delusion that homes prices only go up” was the root cause of the financial crisis.
The session concluded with a question on the struggle of community banks in the face of the big banks. Kashari also spoke about Dodd-Frank, which he stated increased the cost of compliance, which many small banks are incapable of handling.
“We need to relax some of the regulations that are smothering community banks,” he said. “If we can address the big banks, and relax regulations smothering community banks, we can probably solve both problems at the same time.”
Watch the entire Q&A with Neel Kashkari here.