In his speech, Kashkari called for three crucial steps:

• “Breaking up large banks into smaller, less connected, less important entities.”
• “Turning large banks into public utilities by forcing them to hold so much capital that they virtually can’t fail (with regulation akin to that of a nuclear power plant).”
• “Taxing leverage throughout the financial system to reduce systemic risks wherever they lie.”

That’s from a Business Insider account of his speech.

Kashkari, who ran the Treasury Department’s Troubled Asset Relief Program under both President George W. Bush and President Obama, worked for Goldman Sachs’ San Francisco office before his government job. After leaving the Treasury Department, he joined Newport Beach-based PIMCO. While he lost to Gov. Jerry Brown in a landslide, he was still considered an up-and-comer in California politics before moving to Minneapolis last year, where he assumed the Fed post in November. If he does seek California office again, as some political observers expected, his speech will likely be a focus for its perceived populist themes.

‘It’s very hard to see crises coming’

The Washington Post, Politico and many other East Coast media treated Kashkari’s comments as highly newsworthy and provocative. Reuters called his ideas “radical.” In a subsequent interview with the Post, Kashkari said, given the unpredictability of the global economy, it’s smart to adopt reforms during relatively stable periods to prevent future shocks before they happen:

If you look around the global economy, there’s a lot of uncertainty. There are people who are concerned about China’s slowdown and whether it’s going to be a hard or soft landing. All of those are out there, but it’s very hard to see crises coming.

 

Nobody was omniscient enough to call $100 oil or $150 oil a bubble. I’m not saying that it was a bubble; I think it’s supply and demand forces. But certainly nobody forecast it going down to $30. That’s just an example of an exogenous shock. Everybody’s eyes were open. None of the smart people saw it coming. What else don’t we see coming? …

 

[It] isn’t clear to me that just keeping investment banking separated from depository lending is necessarily by itself a solution. If we go back to the root causes of ’08, we had a nationwide delusion that home prices only go up. I participated in that delusion: I bought a house in California in 2005. Traditional banks made a lot of bad loans based on the premise that if home prices keep going up, these loans are going to be okay. …

 

To really be strong enough against a shock we haven’t thought of, we would either need much, much higher capital requirements — the banks are already pushing back hard against the capital surcharges — or we need to look at much stronger or more intense stress scenarios.

Kashkari, 42, a Hindu native of Ohio, has undergraduate and graduate degrees in mechanical engineering from the University of Illinois/Urbana-Champaign. He worked as an engineer for TRW in Redondo Beach before going to the University of Pennsylvania’s Wharton School for his MBA, which led to his Goldman Sachs job. When Goldman Sachs chairman/CEO Henry Paulson became U.S. secretary of the treasury in 2006, he hired Kashkari as an aide, laying the groundwork for his appointment as the assistant treasury secretary overseeing TARP.

He only could mean Kashkari leading the $700 billion Troubled Assets Relief Program during the 2008-09 finanical crisis, when Kashkari voted for Barack Obama for president that November. Critics charged TARP robbed Main Street to bail out Wall Street.

But during the 2008-09 financial crisis, Issa opposed TARP. On Oct. 3, 2014, he voted Nay on HR 1414, officially called the Emergency Economic Stabilization Act of 2008.

And here’s Issa on Nov. 14, 2008 , grilling Kashkari on TARP:

Politics sure is a strange business.

As I mentioned in a previous post, the GOP Establishment is backing Kashkari. Issa used to be something of a maverick. Maybe now not so much.

The main reason for this, however, isn’t the behavior of California Republicans. It’s both a broad ideological trend and specific emerging problems in the Democratic coaltion.

The trend I refer to is the increasing emergence of tech libertarians in state politics. The rich ones are a potent source of money and lobbying clout. The young ones in Silicon Valley and elsewhere are a niche voting group likely to turn out on Election Day. They have little faith in government. Even if they’re mostly Democratic now, they’re not Dems because they want the leviathan to get bigger.

The specific emerging problems for Dems have to do with the fundamentally different agendas of key party factions.

The battle is already in the open between Asian Democrats and black/Latino Democrats over a return to explicit racial favoritism in UC admissions policies.

But with every year, we inch closer to the political equivalent of the Big One, in which Latino Democrats conclude Latino kids are not well-served by their lawmakers’ reflexive support of public education policies that value the interests of majority-white teachers unions over majority-Latino student bodies.

A crucial example of this can be seen in the race for state superintendent of public instruction. Former L.A. Mayor Antonio Villaraigosa avidly supports reformer Marshall Tuck over incumbent/CTA tool Tom Torlakson. Villaraigosa has been a quasi-mentor to a generation of California Latino pols in their 20s and 30s. John Perez may still be a CTA/CFT lackey, but a lot of these emerging Latino pols are likely to be closer to Villaraigosa than to his fellow Angeleno Perez. Gloria Romero, another L.A. Dem, may yet be vindicated for her depiction of the priorities of the school system as being the biggest California civil rights issue.

Eager to excuse Donnelly’s abject racist stupidity

But even if all these issues break well for the GOP in California, will the party take advantage? A month ago, I’d have said yes. Now, after watching the mixed reaction to gubernatorial candidate Tim Donnelly’s abject racist stupidity about Neel Kashkari, his Indian-American opponent, I am far less sure. A party whose rank-and-file doesn’t grasp the need to cast this guy out of the village is doomed.

I wrote about Donnelly’s idiocy in the U-T San Diego:

“Donnelly could have cruised to the runoff simply by repeating over and over that Kashkari played a key role in the Troubled Asset Relief Program — the unpopular big-government scheme that Presidents George W. Bush and Barack Obama implemented to try to shore up the economy in 2008 and 2009.

“Instead, Donnelly has chosen to be a race-baiter. He has repeatedly depicted Kashkari as an advocate of extreme Islamic Sharia law because Kashkari once spoke at a conference in which Sharia finance was the focus.

“This is ridiculous. Kashkari is a Hindu of Indian descent who advocates free-market capitalism — not a Muslim cleric seeking religious control of government institutions.

“It is also odious, because Donnelly evidently hopes to gather votes from Californians by encouraging the idea that all people with dark skin whose ancestors hail from Asia are crypto-terrorists.

“Sadly, this may be something that Donnelly actually believes.”

And even if he does believe it, based on the online comments and emails I’ve seen, lots of GOPers are eager to forgive him for it.

Both Donnelly, Kashkari are ‘imperfect’

As well as some people who should know way, way better. FlashReport gave big play Sunday to a piece on the governor’s race in which author David Salaverry suggested there was some sort of moral equivalence between Donnelly’s Sharia manure and Kashkari’s criticizing Donnelly for taking government perks and being a bad businessman.

They’re both “imperfect” GOP candidates, you see.

Get used to being marginal, California Republicans. If you’re this obtuse, you deserve it.

This is not a defense of Kashkari. It takes chutzpah to run for the Republican nomination for governor in the largest state after admitting to voting in 2008 for the epic walking debacle that is Barack Obama. But at least Kashkari is not a racist dolt.

Like Tim Donnelly.