Leaving Goldman Sachs for life in public service can take various forms. On one hand, you can join a presidential administration that once basically accused your former boss of carrying out the protocols of the elders of Zion and oversee a deregulatory bonanza so nakedly beneficial to your prior employer that lawmakers assume you're still following their orders – i.e., the Gary Cohn route. Alternately, you can follow the path blazed by rugged mountain man and very large dog owner Neel Kashkari, who after Goldman, ran the Treasury's TARP program, mounted an unsuccessful gubernatorial campaign, and eventually used a position as Minneapolis Fed president to promulgate his positively Bernie-like stance on bank regulations. The House of Lloyd is a big tent.
It was only inevitable that those two paths would meet, as they did Monday when Kashkari took a rhetorical axe to arguments recently voiced by Cohn that banks aren't lending because of capital requirements. The idea, said Kashkari, is “complete nonsense.”
“The fact is the matter is borrowing costs for homeowners, for consumers, for businesses are near record lows,” Kashkari said in a speech to the National Association for Business Economics.
“If the banks were capital constrained, you and I as borrowers would be competing for scarce loans, which would be driving up the borrowing costs of those loans,” Kashkari said. “That’s not happening today.”
Though Kashkari didn't mention him by name, he's not the first to dump on Cohn's contention that, due to capital limits, “banks do not lend money to companies” anymore. Larry Summers called it “indefensible.” The Financial Times called Cohn an embarrassment to Goldman. While there's plenty of evidence to suggest that a few regulations are overdone – there Kashkari agrees – the data are notkind to the idea that credit has completely seized up post-Dodd-Frank.
Who knows what Lloyd thinks about all this, if he cares at all. But given the fact that Cohn and Goldman are not on a speaking basis due to congressional scrutiny and/or common sense, Gary might have to find a new shoulder to cry on over Kashkari's mean words.