Bailout administrator: TARP prevented 25% unemployment

Unemployment could have been north of 25 percent had the government not enacted its massive bailout program last year, a former top Bush administration official said Tuesday.

Neel Kashkari, a former assistant Treasury secretary who headed up the Office of Financial Stability as part of the $700 billion Wall Street bailout, suggested that the economic consequences would have been disastrous without government intervention.

"In the Depression, it [unemployment] was 25 percent," Kashkari said during an interview on CNBC. "I have no reason to know if it would have been that high or maybe even higher. And it could have taken many, many years to come out of that."

Kashkari had been a key figure in the Bush administration's engineering of the Troubled Asset Relief Program (TARP) last fall, and had held over in his position until May of this year in a transitionary capacity.

He said that there is "no question" that the economy was damaged by the financial crisis, but that things couple have been catastrophic without the TARP program.

"You know, if the financial system had collapsed, businesses of all sizes--not Wall Street firms; industrial companies of all sizes wouldn't have been able to access funds to pay their employees, who then wouldn't have money to pay their bills," he said. "It would have cascaded through our economy, leading to economic devastation. As bad as it is today, it could have been so much worse."

Kashkari, who has taken time off from business and politics since leaving the Treasury, still warned that the economic danger is not yet passed.

"The risk of a collapse is behind us, but we still have real economic challenges," he said. "Not just unemployment, which is very serious, we obviously have huge, looming fiscal challenges that we need to deal with in the future."

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