Today, in what many will perceive as a blatant example of cronyism, Treasury Secretary Henry Paulson, appointed a former Goldman Sachs executive, Neel Kashkari, 35, to head the Treasury's new Office of Financial Stability.

The new mortgage bailout bill gives the United States Treasury Secretary unprecedented powers over the economic and financial life of the United States. Some have suggested Paulson's plan may potentially have some conflicts of interest, since he is the former CEO of Goldman Sachs, a firm that may benefit from the plan.

In his position, Kashkari will oversee a program to increase bond sales to help pay for the $700 billion package that was approved with fanfare and signed Friday by President Bush.

Unlike the previous bailouts and managed liquidations of Goldman competitors Bear Stearns, AIG, Freddie Mac and Fannie Mae, in which shareholder value was largely wiped out, Goldman's stock could rise under the Paulson plan, together with many financial stocks, benefiting his former partners because it would remove some distressed assets from their balance sheet.

While Paulson has no direct financial interest in Goldman since he sold his entire stake in the firm prior to becoming Treasury Secretary, pursuant to ethics law, there are still questions about his potential financial gain and positioning. 

Kashari Biography:

Neel Kashkari was designated as the Interim Assistant Secretary of the Treasury for Financial Stability on October 6, 2008. In this capacity, Mr. Kashkari oversees the Office of Financial Stability including the Troubled Asset Relief Program.

Mr. Kashkari also continues to hold the position of Assistant Secretary of the Treasury for International Economics and Development, but his International Affairs responsibilities are delegated to Assistant Secretary for International Affairs Clay Lowery while Mr. Kashkari serves as Interim Assistant Secretary for Financial Stability.

Mr. Kashkari joined the Treasury Department in July 2006 as Senior Advisor to U.S. Treasury Secretary Henry M. Paulson, Jr. In that role, he was responsible for developing the President’s Twenty in Ten energy security plan, enhancing Treasury’s engagement with India, particularly in the area of infrastructure development, and developing and executing the Department’s response to the housing crisis, including the formation of the HOPE NOW Alliance, the development of the subprime fast-track loan modification plan, and Treasury’s initiative to kick-start a covered bond market in the United States.

Prior to joining the Treasury Department, Mr. Kashkari was a Vice President at Goldman, Sachs & Co. in San Francisco, where he led Goldman's IT Security Investment Banking practice, advising public and private companies on mergers and acquisitions and financial transactions. Prior to his career in finance, Mr. Kashkari was a R&D Principal Investigator at TRW in Redondo Beach, California where he developed technology for NASA space science missions such as the James Webb Space Telescope.

Kashari holds a B.A and M.A. in engineering from the University of Illinois at Urbana-Champaign and an M.B.A. at the University of Pennsylvania’s Wharton School of Business. He spent the last two years examining the consequences of an economic housing fallout and helped draft the rescue/bailout bill. 

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