TARP May Need Tech Vendors, Kashkari Intimates

A technology system may automatically decide which of thousands of banks applying for direct government funding from the bailout fund get it, Neel Kashkari, indicated in one of his first public addresses since being appointed to oversee the fund. His comments opened the door on a new role for a vendor in the Troubled Asset Relief Progam (TARP).

Kashkari said, "Potentially thousands of banks can participate" in the government's direct aid program. Addressing a special summit on the TARP organized by the Securities Industry and Financial Markets Association (SIFMA) on Nov. 10, Kashkari recalled that $250 billion of the $800-billion TARP fund has been earmarked for nine top banks.

As many others apply, the government will need help in responding, said Kashkari, the interim assistant secretary of the Treasury for financial stability, colloquially known as "the bailout czar". "The operational and processing complexity of executing hundreds or even thousands of these transactions is extraordinary," he said, adding, "We are setting up a formal transaction processing model to ensure high quality and rapid execution." However, Kashkari added, "We have asked our master custodian, the Bank of New York Mellon, to handle much of the document management."

Kashkari explained that there will be a system whereby applicants are fairly immediately rejected or approved, or, in other borderline cases, referred by individual financial regulators to a new pan-regulatory body, the TARP Investment Committee, to adjudicate.

Separately, during the conference it was suggested that Treasury would fund banks with good CAMEL ratings—evoking the possibility of an automated scoring system. Kashkari was not available to answer questions on whether the Treasury is thinking along such lines.

However, he noted elsewhere in his talk that Treasury is seeking vendor solicitations from various contractors needed to provide service to TARP. These include an asset manager that will run the Treasury's stock holding in banks it has funded. Kashkari said any firm with a minimum of $100 million in assets under management is eligible to apply, noting that Treasury wants to encourage women and minorities to apply for all TARP service roles.