Dan Morain

Dan Morain: Race to define state’s GOP

When few people were listening a few years ago, Tim Donnelly and Neel Kashkari talked openly, speaking volumes about who they are and what they think.

Their words echo now as they run for governor in a race that will define the California Republican Party for years to come. Pistol-packing Tim leads Kashkari, a former U.S. Treasury official, by a wide margin in polls of likely voters.

Neither Republican can defeat Gov. Jerry Brown in the November election. But if Donnelly places second in the June 3 primary, as seems likely today, he’d become the goateed face of the party.

Kashkari is mired at 2 percent in the polls, despite endorsements from Mitt Romney, former Gov. Pete Wilson and other prominent Republicans who understand they will revive their once-Grand Old Party only if they can attract Latinos, Asians and new citizens.

To understand why Republican brass might like to kneecap Donnelly, step back to March 2006, four years before he was elected to the Assembly from the San Bernardino County town of Twin Peaks. Donnelly was a self-appointed guardian of the California-Mexico border and immersed in the Minutemen movement.

“I am a descendant of Jim Bowie, who died at the Alamo,” Donnelly said, ginning up a crowd of 200 people in the Riverside County town of Temecula, attended by current and former Republican officeholders. “It is rumored that he took a dozen Mexican soldiers to their deaths before they finally killed him. How many of you will rise up and take his place on that wall?”

Exactly which wall he’s talking about isn’t clear, but that passage could be heard as a call to violence, as could this:

“We are in a war. You may not want to accept it. But the other side has declared war on us.”

Or this: “They wave Mexican flags and gesture rudely. They chant their hatred of United States in a foreign language. They stomp on, spit on and burn the American flag.”

“In the name of diversity,” he said in 2006, as disclosed by The Los Angeles Times, “we are bringing millions of people into our country who want nothing to do with diversity. Their creed is: ‘For anyone in the Hispanic race, everything. For everyone outside it, nada, nothing.’ ”

He told the audience about an “insurgency in Los Angeles, New York and Chicago,” and likened it to the insurgents then battling U.S. soldiers in Iraqi cities.

“You must commit your very life to this cause. The time has come when all good men and women must come to the aid of their country. You must be prepared to give your very life to this cause, this forgotten ideal called America.”

Donnelly has smoothed his rhetoric since arriving in Sacramento, which raises the question: Was he acting then or is he acting now? The 2006 version of Donnelly became all too real when he tweeted last week that Kashkari somehow adhered to Shariah law.

No matter that Kashkari is a Hindu, or that the son of immigrants from India is a classic example of the American dream, one who has accomplished more in his 40 years than Donnelly ever will.

On Nov. 2, 2010, Jerry Brown was elected governor for the third time, and Kashkari spoke for an hour and a half on tape to San Francisco attorney Christopher Seefer, one of the lead investigators for the congressionally created Financial Crisis Inquiry Commission, responsible for looking into the causes of the Great Recession.

In 2010, Kashkari was managing director and head of global equities for the investment firm Pimco in Newport Beach. The economy had stabilized, more or less, and if Kashkari had political ambitions, he kept them to himself.

Kashkari had studied engineering, worked as a rocket scientist, got a business degree, went to work for Goldman Sachs, and followed former Goldman Sachs chairman and Treasury Secretary Henry Paulson to the U.S. Treasury Department in 2006. Paulson assigned Kashkari to be one of his main point people responsible for averting another Great Depression.

The Financial Crisis Inquiry Commission tape stirs frightful memories: the failure of Bear Stearns in March 2008, later AIG, Washington Mutual, Wachovia and the horror in September 2008 when Lehman Brothers failed.

“At the end of the day,” Kashkari said, “we were doing something that was deeply unpopular and deeply unfair. Right? We all believe in free markets.

“We all believe that if people take a risk they should get the reward, and if someone takes a risk, they should bear the consequences. And yet we had to violate that core belief.”

Kashkari recalled the tense days after Lehman failed, when he, Paulson, and a few other top officials went to Congress seeking broad authority to deal with the crisis. As they lobbied on Capitol Hill, the FDIC had spent billions to stabilize banking giant Wachovia. Kashkari recalled that members of Congress seemed to think the crisis had been averted.

“I looked at them like they were out of their minds,” he recalled. “We were so deep, fighting the fire every day, and yet on Capitol Hill – no criticism – they were just too far removed to really understand how perilous the situation was.

“We were terrified the financial system would collapse. Blue-chip industry companies couldn’t fund themselves. Think about that. They couldn’t make payroll. Even Americans who have jobs can’t make their rent. They can’t make their car payment. It cascades through the economy, and the Great Depression scenario was omnipresent.”

As the Bush administration came to a close, Kashkari became head of TARP, the Troubled Asset Relief Program, which bailed out banks by infusing them with capital. At the request of Barack Obama’s first treasury secretary, Timothy Geithner, Kashkari remained at TARP through May 2009.

Donnelly rarely misses a chance to point out Kashkari’s involvement in TARP. It is, Donnelly told me recently, “immensely unpopular.” But he was playing Border Patrol agent and fanning prejudice, while the financial crisis was unfolding and when a depression was being averted.

The two tapes are straightforward. One is a rant by a demagogue who plays on people’s fears. The other is a recitation of actions that probably helped save the economy from calamity. The question for Republican voters is straightforward: Which will you hear?