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"We're not day traders, and we're not looking for a return tomorrow"
-Neel Kashkari (Director of Treasury's Office of Financial Stability)

After losing approximately $9B (as in billion), or 1/3 of the value implied in the so called “preferred investments” Neel and his investment banking mentor Hank Paulson made in structurally impaired banking businesses, we should send this guy back to business school. He wasn’t there very long ago – he’ll be cool with it.

Neel is what the real risk managers in this business call a “theoretical guy.” He has never traded a day in his life, and this is no environment for a rookie to be holding the panic button.

You see, Neel didn’t lose this money in one day – he and Hank “The Market Tank” lost it over the course of a month. Managing risk on a monthly basis is presumably a pragmatic strategy for someone in charge of “directing financial stability”; particularly if your boss is the Goldman guy who oversaw the build out of some of the most levered short term prop trading businesses that the world has ever seen.

Per Wikipedia, you’ll notice that Neel being unaware of how market’s trade really isn’t his fault:
“Prior to joining the Treasury Department, Kashkari was a Vice President at Goldman, Sachs & Co. in San Francisco, where he led Goldman's Information Technology Security Investment Banking practice, advising public and private companies on mergers and acquisitions and financial transactions. Kashkari has a Bachelor's and Master's degree in engineering from the University of Illinois at Urbana-Champaign and an MBA in 2002 from the Wharton School at the University of Pennsylvania.[2][1] Before enrolling in Wharton's MBA program, Kashkari worked for the aerospace firm TRW, where, amongst other projects, he worked on the James Webb Space Telescope.”

Neel has never traded a market with real capital. He has never managed real time risk. He wouldn’t know a trading return if he saw the opportunity to earn one tomorrow anyway. After losing $9B’s, his aforementioned quote is right on the money - I can guarantee you he will never be hired to “trade” anything.

This is all so sad and ridiculous all at once. Unfortunately for Mr. Paulson, American history will record his judgment calls for what they were – wrong. Hiring a junior Goldman banker to be his “yes man” when this country needed both perspective and proactive risk management most is what it is. Shame on you Hank.

We are looking forward to The New Reality; we are looking forward to new leadership at the US Treasury; we, like all Americans, are looking forward to earning a return tomorrow.

Keith R. McCullough
CEO / Chief Investment Officer