Treasury Plans to Tap Fannie Mae Chief to Run Bailout
Tuesday, April 14, 2009
The Treasury Department is moving closer to naming Fannie Mae chief executive Herbert M. Allison Jr. to run its financial recovery program, according to people familiar with the matter.
Allison, who has led Fannie Mae since the government seized the firm in September, for weeks has been a candidate to run the Troubled Assets Relief Program, the $700 billion federal initiative to stabilize banks, keep struggling borrowers in their homes and spur lending. Other candidates for the post have dropped from contention.
"He will be asked by Obama," said a financial industry executive who discussed the nomination with Treasury officials and spoke on condition of anonymity.
Treasury and Fannie Mae spokesmen declined to comment on Allison's potential appointment, which was not finalized last night.
If named to the Treasury, Allison would replace current TARP head Neel Kashkari. Kashkari has stayed on from the Bush administration, becoming an influential figure under Treasury Secretary Timothy F. Geithner.
Allison, 65, has been close to Geithner for years. Allison served on an advisory committee to the Federal Reserve Bank of New York, of which Geithner was president. Allison formerly was vice chairman of Merrill Lynch and chief executive of TIAA-CREF.
The new head of TARP would take over at a key moment. The largest 19 banks are undergoing "stress tests" by the government to see how much more in private or public capital they might need. Meanwhile, one program to spur lending backed by tens of billions in TARP funds is getting underway, and officials are putting the final touches on another, to remove troubled assets from banks' balance sheets.
Allison would have a more influential role at the Treasury than at Fannie Mae. As head of the District-based mortgage finance company, he answers to a board, which answers to a federal regulator, which in turn takes its cues largely from the Treasury. Allison also may be in line for a pay hike if he wins the government job. He has forsworn a salary at Fannie Mae.
At Fannie Mae, Allison was quick to say that the company would be putting the goal of housing recovery ahead of maintaining profitability as a shareholder-owned corporation.
But his departure could complicate matters at the company, which is struggling to retain top talent. Many employees have started to search for jobs after lawmakers criticized bonuses paid at the firm.
Allison's departure would leave both government-run mortgage companies without permanent chief executives.
David Moffett, who was also appointed by the government, left McLean-based Freddie Mac last month amid squabbling with the company's regulator. The temporary chief executive is John A. Koskinen, who was previously Freddie Mac's chairman.
Staff writer David Cho and staff writer Tomoeh Murakami Tse, in New York, contributed to this report.