When he left Goldman Sachs to join the Treasury Department in 2006, Neel Kashkari held a worldview that played to type, The New York Times reported yesterday. “I was a free-market ideologue,” he said. Then came a huge, sudden financial crisis, and the free-market ideologue found himself sending bailouts to Wall Street in hopes of averting a second Great Depression. Now president of the Federal Reserve Bank of Minneapolis, Kashkari is no longer a free-market ideologue. “Markets can make mistakes, and sometimes those mistakes can be incredibly costly,” he said. He believes that the Dodd-Frank regulatory overhaul enacted under President Obama didn’t go far enough — and that the biggest banks may need to be broken up, which led him to create the “Ending Too Big to Fail” initiative. It hasn’t settled on recommendations for reducing the risk that bailouts would be needed during the next financial crisis, whenever it occurs, but the initiative has unsettled and confused some erstwhile Republican allies. Kashkari fears the financial sector has grown too large as a share of the economy as middle-class incomes have stagnated, but the shift in his outlook goes only so far.
