Ex-space engineer launches U.S. financial rescue

WASHINGTON (Reuters) - Neel Kashkari, the man charged with launching the U.S. government's unprecedented $700 billion bank rescue, knows a thing or two about getting complex apparatus off the ground.

After all, he could be considered a former rocket scientist.

Before he went to work in high finance, the former Goldman Sachs investment banker worked in research and development at TRW Inc, a contractor for the National Aeronautics and Space Administration, designing parts for a space telescope.

He has moved from solving technology problems to confronting what may be the thorniest problem in the United States: how to restore confidence in a financial system teetering on collapse.

Kashkari, 35, was named interim assistant secretary of the treasury for financial stability on October 6. He will oversee a $700 billion fund that will be used to purchase bad debts from financial firms and purchase equity in U.S. banks in the hopes of spurring fresh lending.

Previously a behind-the-scenes adviser to Treasury Secretary Henry Paulson, Kashkari has become the "$700 billion man" -- a celebrity in Washington policy circles. His debut speech in the job at a banking forum last Monday drew a standing-room-only crowd and he was swarmed by reporters.

"He seems to be eager to identify the problems as quickly as he can," said Wayne Abernathy, a financial policy expert at the American Bankers Association. "And so far his communications are more detailed than a lot of what I've seen from the Treasury lately."

ANSWER MAN

Kashkari is among a number of former Goldman Sachs executives who followed Paulson from the Wall Street investment bank to the Treasury. But he did not follow the typical private sector-to-government path of bringing a career's worth of experience to a top-level job.

Instead, Kashkari, with only a few years under his belt at Goldman Sachs, met Paulson at a speaking engagement and expressed his interest in government service. When Paulson was named Treasury secretary in 2006, Kashkari volunteered.

Born to Indian immigrants in Akron, Ohio, Kashkari grew up in the nearby town of Stow and followed in the footsteps of his

engineering professor father. He earned bachelor's and master's degrees in engineering from the University of Illinois at Urbana-Champaign, where he also met his future wife, Minal.

Jonathan Kimball, a former engineering classmate at Illinois, said Kashkari was intense and a natural leader.

The two worked together on a team that designed a solar-powered car for the 1995 Sunrayce, an annual collegiate cross-country solar vehicle race.

"It was pretty obvious he should be in charge," said Kimball, now an engineering professor at Missouri University of Science and Technology. "Even before he was a leader, people looked to him for guidance and expertise. He came across as this really smart guy that, if he didn't know the answer, he knew how to get the answer."

From there, he went to work at TRW, now a part of Northrop Grummman Corp (NOC.N) in Redondo Beach, California. He relished the problem-solving work but decided to enter an MBA program at the University of Pennsylvania's Wharton School.

Landing a job at Goldman Sachs, he worked in investment banking in a relatively specialized sector -- information technology security.

"FREE-MARKET REPUBLICAN"

At the Treasury, Kashkari was immediately put to work on housing issues. He helped to develop the private-sector Hope Now initiative among mortgage lenders, servicers and credit counselors to modify mortgage terms for troubled borrowers.

Before the government seized control of mortgage finance giants Fannie Mae and Freddie Mac in September, Hope Now was the centerpiece of the Bush administration's housing-crisis response. Critics said it was not helping enough homeowners.

Kashkari described himself as a "free-market Republican" in remarks to the American Enterprise Institute last month, and said the housing correction was necessary.

"There is no silver bullet for the housing market. There's no one tool that's going to solve all of our problems," he said as he advocated development of bank-issued covered bonds as an alternative mortgage finance tool.

In his new role, Kashkari is busy building the apparatus for the Treasury to buy troubled assets and inject capital directly into banks.

His first speech laid out a methodical approach: setting up internal teams to deal with each major aspect of the program and hiring advisers to evaluate asset management bids.

But his toughest task may be keeping up with the rapidly shifting credit crisis and recommending modifications to the government's response.

"Events have moved on since they announced the $700 billion plan to buy troubled assets," said Simon Johnson, a senior fellow at the Peterson Institute for International Economics, noting that Treasury's initial asset-purchase plan now includes a program to buy equity stakes directly in banks.

"It's better to recapitalize the banks and they may have to use more of the money for that," he said.

(Reporting by David Lawder)