June 4 (Bloomberg) -- Californians picked Republican Neel Kashkari, a political newcomer who ran the federal bailout of the U.S. banking system, to challenge incumbent Democrat Jerry Brown for governor in November.
In a new primary election system that advances the top two vote-getters regardless of party, Brown won 55 percent of the vote, followed by Kashkari at 19 percent, according to the California Secretary of State’s office. Tim Donnelly, a state assemblyman allied with the Tea Party, was third with 15 percent and conceded early today.
“My commitment is to rebuilding California’s middle class and re-energizing the Republican Party,” Kashkari said in a statement. “Jerry Brown’s legacy is the destruction of the middle class. And together, we are going to hold him accountable.”
Kashkari’s victory comes amid a civil war between the Republican Party’s more traditional business-backed wing and Tea Party small-government advocates. Former Governor Pete Wilson and U.S. Representative Darrell Issa warned that Donnelly, on probation for gun charges, threatened the image of the state party that produced presidents Richard Nixon and Ronald Reagan, Supreme Court Chief Justice Earl Warren and superstar Governor Arnold Schwarzenegger.
“Kashkari is the underdog, but he will fare better than Donnelly would have,” said John Pitney, a political science professor at Claremont McKenna College in Claremont, California. “Unless he makes some big mistakes, Kashkari will not be a liability to other Republicans.”
Brown, 76, enters the general election far ahead of Kashkari in polls and with $21 million in campaign cash. Buoyed by a boost in state revenue from a resurgent economy and increased taxes approved by voters, Brown can boast of a budget surplus and better credit ratings in a state once compared to Greece for its fiscal turmoil.
A University of Southern California Dornsife/Los Angeles Times poll released June 1 found Brown would beat Kashkari, 55 percent to 27 percent, if the general election were held now. The telephone poll of 1,511 registered voters from May 21-28 had a margin of error of plus or minus 2.9 percentage points.
“I’m cautious,” Brown told reporters outside the historic governor’s mansion in Sacramento. “I am going to do everything I can to merit the people’s trust and then in November the people will choose whether they want an unprecedented fourth term or not.” Brown is the longest-serving governor in state history.
Kashkari, 40, with $1.4 million in campaign cash as of May 22, is making his first run for public office. A former vice president at Goldman Sachs Group Inc., Kashkari managed the U.S. Treasury’s $700 billion bank rescue known as the Troubled Asset Relief Program in 2008. Current and previous Goldman Sachs employees, including former U.S. Treasury Secretary Henry Paulson, have helped Kashkari raise campaign funds.
He joined Pacific Investment Management Co. in Newport Beach, California, in 2009, where he led the world’s largest bond fund’s expansion into equities, before leaving to run for governor.
Donnelly, 48, a gun-rights advocate, is on probation after pleading no contest to misdemeanor charges for carrying a loaded pistol into an airport in 2012. He said he’d forgotten he had the firearm.
A former member of a vigilante group that patrolled the U.S.-Mexico border, Donnelly likened undocumented immigrants to violent insurgents and suggested that Kashkari, a Hindu, supports radical Islamic law.
California’s top financial posts were also up for grabs in the election, with state Treasurer Bill Lockyer, 73, and Controller John Chiang, 51, both Democrats, leaving those offices because of term limits.
Chiang is running for treasurer and will face off in November against Republican Greg Conlon, a retired accountant and former president of the California Public Utilities Commission, according to election results. The race for controller was too close to call, with Fresno Mayor Ashley Swearengin, 42, a Republican, leading and a dead heat for second place between David Evans, a Republican, and former Assembly Speaker John Perez, 44, and Board of Equalization member Betty Yee, both Democrats.
In the race for secretary of state, a Democratic state senator who dropped out of the campaign after he was arrested on firearms trafficking charges, Leland Yee, placed third in a field of eight candidates. Democratic State Senator Alex Padilla and Republican Pete Peterson won the top two spots.
Voters also picked candidates in 20 of 40 state Senate districts and all 80 Assembly districts. In coastal Los Angeles, 33-year-old lawyer Sandra Fluke, whose 2012 congressional testimony on contraception drew insults from radio host Rush Limbaugh, and fellow Democrat Ben Allen led in the 26th Senate District.
Investors in California bonds demand 0.38 percentage point more than top-rated debt for 10-year securities, according to data compiled by Bloomberg. That’s down from 0.54 percentage point on Jan. 15.