The man who said what sane officials all privately think about banks

Neel Kashkari was recently appointed chairman of the Federal Reserve Bank of Minneapolis (Reuters)

Under Federal Reserve chair Janet Yellen, the US central bank has arguably become more apolitical and more cautious than it has ever been before. So it might be worth familiarising ourselves with the name Neel Kashkari.

Mr Kashkari has a colourful background, much more so than the other academic bores that occupy federal banking positions. A former Goldman Sachs technology banker, he was hired by Treasury secretary and fellow Goldman old boy Hank Paulson in 2008 to lead the “Tarp” bailout – a $700bn (£490bn) effort that either saved the global banking industry or was a taxpayer-funded Wall Street freebie, depending on your point of view.

Upon leaving the Treasury, Mr Kashkari moved to the fixed-income giant Pimco, where he worked on increasing its exposure to equities – which turned out to be one of Pimco’s worst ideas. Still, it wasn’t his idea. In 2014 he ran for Governor of California as a Republican, managing a surprisingly sane campaign before losing to the incumbent (and popular) Democratic Governor Jerry Brown.

So on to the next gig, where this week Mr Kashkari used his maiden speech as chairman of the Federal Reserve Bank of Minneapolis to go where no federal banker has gone before: he called for the break-up of the big Wall Street banks. Not the usual start to a career as a policy wonk.

In the speech, at liberal-leaning think tank the Brookings Institution, Mr Kashkari said: “The biggest banks are still too big to fail and continue to pose a significant, ongoing risk to our economy.” He went on to advocate an extension of the Dodd-Frank Act – financial regulations introduced by Congress in the wake of the 2008 banking collapse. “I believe we must seriously consider bolder, transformational options,” he said. “The risks of not doing so are just too great.” An uncomfortable thought perhaps, but absolutely correct.

If pushed for an honest answer, any banker, federal or on Wall Street, ought to admit that having banks that are “too big to fail” is a risk bordering on lunacy. Breaking up the big banks – into smaller investment banking, retail banking, insurance and trading companies – would be the most effective way to prevent a repeat of 2008’s meltdown. To break them up would not prohibit anyone from doing business, and would open up a market that has become an oligopoly. It would also mean that the fallout from mismanagement, misconduct and billion-dollar bets going wrong – all of which are as certain as death and taxes – would be far easier to contain.

The other upside to breaking up big banks is obvious – no more being held to ransom by a recidivist industry that could, and will, drag us all down with it. For a central banker to say so in public, rather than at a dinner party, shows that Mr Kashkari is cut from a different cloth to the majority of his peers. Most of them wouldn’t say boo to a goose; mixing economics and politics is seen as bad form – absurd considering that politics and economics are inextricably linked. Mr Kashkari is, so far, alone among bankers in having the guts to say publicly what they all know to be true privately. It is only a matter of time before Wall Street’s addiction to gambling catches up with it again, and how much damage will it do next time?

Goldman is unlikely to welcome Mr Kashkari back after his apostasy, but perhaps someone will be brave enough to give him the gig he deserves – breaking up Wall Street.

Uber is getting a taste of its own medicine in China

Few companies are more polarising than the ride-hailing app creator Uber. Most of its customers seem to love it, and it’s hard to argue that the taxi industry didn’t need shaking up. The flipside is that the company claims to be part of the “sharing” economy while at the same time displaying a ruthless streak that would make Genghis Khan blush. Those claims are as laughable as the $62.5bn it was valued at in December.

Despite Uber’s ability to raise money at will from investors (many of whom must be a tad uneasy right now), not everything is rosy. In an interview this week with the Canadian technology publication BetaKit, Uber’s chief executive Travis Kalanick admitted that the company is losing $1bn a year in China.

The reason the People’s Republic is proving such a tough nut to crack is that Uber has a local rival with equally deep pockets. Didi Kuaidi is backed by online retailer Alibaba and Tencent, one of China’s largest tech companies. Uber can’t just shove it around like it does with rivals elsewhere, and Didi Kuaidi has used its financial muscle to undercut Uber’s fares.

In a moment of almost unbelievable chutzpah, Mr Kalanick lamented that Uber has “a fierce competitor that’s unprofitable in every city they exist in, but they’re buying up market share. I wish the world wasn’t that way.” So does everyone else who tries to compete with Uber. For the record, Didi Kuaidi denied that it is unprofitable in all of the 400 cities in which it operates.

Mr Kalanick went on to add, without a hint of irony, that “you can get your butt kicked by others who are raising more money and buying market share, so you have to find a way to contain the irrational when it’s happening”. This from a company that has raised at least $12bn from investors, primarily to grow market share – one that can afford to lose a billion a year. You couldn’t make it up.

It’s not shocking that Mr Kalanick sees his own company as a saint in a world of sinners. That’s part and parcel of being a chief executive these days. But spending money to win market share ahead of making a profit is not a new tactic, and it’s one that Uber has employed as aggressively as many other businesses. Arguably more aggressively.

So it’s also no shock that Mr Kalanick doesn’t like the taste of his own medicine.