http://business.timesonline.co.uk/tol/business/economics/article694...

The architect of America's banking bailout has revealed for the first time the chaos behind the scenes at the US Treasury during the creation of the controversial $700 billion (£425 billion) Troubled Asset Relief Program (Tarp).

Neel Kashkari, the 35-year-old banker picked by Hank Paulson, then Treasury Secretary, to design the Tarp, described how one colleague screamed in panic over the imploding financial system, while another almost died of heart problems because he worked on the bailout rather than seeking medical treatment.

Mr Kashkari, who piled on 23 pounds as he comfort-ate family-sized bags of Doritos through the height of the credit crisis, described the panicked period between October 2008 and May 2009 as “like a dream”.

"Sometimes I think: was it real?" he told The Washington Post in an interview at his shack in the woods of northern California.

Mr Kashkari was a technology banker at Goldman Sachs in June 2006 when Mr Paulson, then the bank's chief executive, was chosen to become President George W Bush's Treasury Secretary. Mr Kashkari followed his boss to Washington as an assistant.

In February 2008, Mr Kashkari was charged with drafting an emergency plan in case the credit crunch became a full-blown financial crisis. By October the crisis had arrived and his ten-page plan became the blueprint for the banks' bailout that Mr Paulson presented to Congress.

Mr Kashkari admitted that he plucked “a number out of the air” when deciding with Mr Paulson how much funding to request from Congress for the Tarp.

He told The Washington Post that he used his BlackBerry to calculate the bailout figures: “We have $11 trillion residential mortgages, $3 trillion commercial mortgages. Total $14 trillion. Five per cent of that is $700 billion. A nice round number.”

Recalling a conversation with Mr Paulson, he said: “It was a political calculus. I said, ‘We don't know how much is enough. We need as much as we can get . What about a trillion?' 'No way,' Hank shook his head. I said, 'Okay, what about 700 billion?' We didn't know if it would work. We had to project confidence, hold up the world. We couldn't admit how scared we were, or how uncertain.”

The former banker remembered how Mr Paulson dry-heaved throughout one night of negotiations with Congressional leaders. On another occasion, he said that a government economist sobbed: “Oh my God, the system's collapsing.”

Don Hammond, chief compliance officer at the Tarp, was hospitalised after suffering a heart attack, having worked for 18 hours a day for 40 straight days to finalise the scheme.

“We were terrified the banking system would fail, but the thing that scared us even more was, what would we do the day after?” Mr Kashkari recalled. “How would we take over 8,000 banks.”

After seven months of criticism in the media and at Congressional hearings — he was dubbed a chump by lawmakers and nicknamed Cash-n-Carry by bloggers — Mr Kashkari quit and moved with his wife to the shack in California, where he chopped wood and exercised to lose his bailout bulge.

He has also helped Mr Paulson to write his memoir, which will be published in the new year.

Yesterday Pimco, the world's biggest bond fund, announced that it had hired Mr Kashkari as a managing director and head of new investment initiatives.

More than a year after the bailout, the Government has admitted that the Tarp was flawed but praised it for helping to save America's financial system from collapse.

At the weekend Timothy Geithner, the Treasury Secretary, said that he expected running the bailout to cost $141 billion— $200 billion less than originally thought — as banks repaid their bailouts more quickly than expected.

So far the Tarp has received $71 billion in repayments, with a further $45 billion due to be paid soon by Bank of America.

President Obama is considering using some of the $200 billion freed up from the Tarp on job stimulus programmes.