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Good Luck, Neel Kashkari

A tough job: The U.S. Treasury will name Neel Kashkari, assistant secretary at the department, to run the $700 billion Wall Street rescue program on an interim basis, according to a Treasury official. Kashkari will be designated the interim head of the new office of financial stability, created in the bailout legislation Congress passed last week. The Treasury aims to buy troubled assets such as home loans and mortgage-backed securities from banks and other financial institutions in an effort to shore up global credit markets.

The Treasury said specifics on how the debt-buying office will operate are still being worked out. "We need to think through what's the best for securities, for loans, to help strengthen the balance sheet of the institutions." Anthony Ryan, the Treasury's acting undersecretary for domestic finance, said in an interview today on CNBC. "We are focusing on the broader issues, the mortgage- related assets."

Senate confirmation is required to fill the position for which Kashkari will be nominated. The Treasury hasn't specified the length of Kashkari's tenure, or whether the White House would nominate him officially. The Bush administration remains in office until January. For now, Kashkari will play a lead role in setting up the new office and organizing its first operations. The Treasury has said it plans to hire about two dozen staff to manage the program, along with five to 10 asset management firms. The first asset-buying operations are not expected for at least four weeks. Kashkari, a former vice president at Goldman Sachs Group Inc., is currently assistant secretary for international economics and development. He has been one of Treasury Secretary Henry Paulson's key advisers on housing issues.

Every other country that is in this business is nationalizing the banks and injecting capital into them. Only the United States is operating on the asset side along. It's unlikely to work, and Neel is now responsible.

Time to shift the focus of the TARP: it shouldn't be buying up assets, it should be injecting capital and taking equity instead--which it can do, the way that Dodd and Frank have written it. But it probably won't do until Paulson is replaced.