Now we've seen it all. While the U.S. frets en masse over who will manage the $700 billion bailout, people close to Treasury Secretary Hank Paulson say he has come up with a winning formula: why not put 35-year-old ex-Goldmanite assistant secretary for international affairs Neel Kashkari in charge of it?

Treasury Secretary Henry Paulson is expected to tap Neel Kashkari, a key adviser on whom he has come to rely heavily during the financial crisis, to oversee Treasury's $700 billion program to buy distressed assets from financial institutions, according to people familiar with the matter.

Mr. Kashkari, 35 years old, a Treasury assistant secretary for international affairs and a former Goldman Sachs Group Inc. banker, is expected to be named interim head of Treasury's new Office of Financial Stability as early as Monday. The position confers substantial power on Mr. Kashkari, who will oversee Treasury's effort to buy bad loans and other distressed securities clogging the books of financial institutions and making them reluctant to lend.

The position is interim, pending Senate confirmation. It isn't likely the Senate will move on the matter before the November elections. Mr. Kashkari isn't expected to remain in the post after January, when the Bush administration comes to an end.

Mr. Kashkari has become one of Mr. Paulson's key advisers over the past year as the housing meltdown deepened and spread to other parts of the economy.

In his new role, Mr. Kashkari will oversee some key decisions on how the program operates. While Congress gave Treasury the authority to start buying assets, many big choices remain, such as which asset managers to hire, which securities to purchase and how to purchase them.

Treasury is trying to determine how to handle conflicts of interest as a result of the program, especially with regard to the asset managers it hires. Anyone with direct experience of these mortgage assets will likely work for a firm with a financial stake in the same assets. Congress told Treasury to establish guidelines to deal with these conflicts and Treasury is likely to establish "firewalls" between asset managers who work for the department and their firms to avoid anyone sharing information. While it is unlikely that all conflicts will be eliminated, Treasury wants to find a way to manage conflicts using strict guidelines, according to people familiar with the matter.

Continue reading on WSJ.com

Next article » Bringing Out The Big Guns

Previous article « Is This It?