Commentary

Treasury Department Needs P.R. Help Now!

The U.S. Treasury should hire a competent public relations firm and send Neel Kashkari, the department’s rude, abrasive Bailout Czar to charm school. According to the NY Post, America’s newest czar gave a Putin-like performance during a brief question and answer session after he delivered the keynote speech at a Midtown Manhattan conference packed with nervous financial professionals yesterday.

Kashkari, who is the interim assistant secretary of the Treasury, said he only had time for “two or three” questions. The first, of course, concerned the U.S. Treasury’s latest AIG bailout plan. Which he explained was a “one-off event” needed to stabilize the markets. And that was all he had to say about it.

I wrote about the confusing nature of the AIG bailout yesterday- which expanded from an $85 billion to a $150 billion scheme in the course of two months. Maybe I’m not as quick as some of the others who are covering the financial bailout, but I had to read five articles to get a good handle on what actually happened and to understand the new bailout’s implications.

Kashkari hails from Goldman Sachs, and apparently he still carries the bravado of the stereotypical investment banker before the Wall Street crisis came knocking. Apparently he and his teammates in the financial stabilization group are working like dogs trying to save the U.S. banking system from collapse. But, I think these guys should clue in to just how unpopular this ever-expanding bailout is becoming.

The U.S. Treasury just turned $40 billion of taxpayer funds into preferred shares of AIG – which, although they pay interest, may or may not be of any value five years down the road. The Treasury also lowered AIG’s interest payments, paid over $50 billion, equivalent to 50 cents on the dollar, for their riskiest CDOs and mortgage-related securities AND put them on the government’s balance sheet.

Now, some of this may make sense as far as stabilizing the credit markets and improving the extremely poor health of financial institutions, but that message certainly is not getting through, nor does it seem that Hank Paulson’s crew at the Treasury Department seems to care.

The super-deluxe version of the AIG bailout was concocted this past Sunday behind closed doors. The Treasury did agree to comply with congressional demands for transparency in the $700 billion financial bailout of America’s banking system. But they are not disclosing much information regarding how they select the institutions they choose to save, or how troubled assets are valued.

Therefore, it might be wise for Treasury officials, including Hank Paulson and Neel Kashkari, to be more open about what it is they’re doing on weekends behind closed doors. If they can’t share certain pieces of information, they need to explain why – they can’t just keep shuffling billions of taxpayer dollars around in the dark.

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© 2008 Splendid Marbles.