The White House turned to an experienced former investment banker on Friday to run the federal government’s US$700 billion bank rescue effort, selecting the head of mortgage giant Fannie Mae as an assistant Treasury secretary.
Herbert Allison Jr, Fannie Mae’s president and CEO, will replace Neel Kashkari, a holdover from the administration of former US president George W. Bush.
Allison, who must be confirmed by the Senate, would bear the title of assistant Treasury secretary for financial stability and counselor to Treasury Secretary Timothy Geithner.
He would be in charge of the Troubled Asset Relief Program (TARP), the fund that has injected billions of dollars into banks in hopes of unclogging credit.
He would inherit a program that has been sharply criticized in Congress and which banks have come to view warily because of the restrictions attached to receipt of its funds.
“Since taking over at Fannie Mae, Allison has shown that he can work in a glass house while a constant storm is raging outside,” said Stan Collender, managing director of Qorvis Communications in Washington and a former congressional aide.
“That ability will serve him well as he steps in to administer TARP,” Collender said.
US President Barack Obama’s administration has been slowly filling Treasury positions, hindered by candidates who have either withdrawn from consideration or been caught up in the vetting process.
Fannie Mae, seized by federal regulators in September, is closely overseen by federal regulators, making the chief executive’s job tough to fill in the private sector. The company, therefore, appears likely to turn to an insider as Allison’s replacement.
The Wall Street Journal reported on Friday that Fannie Mae was expected to name Michael Williams, the company’s chief operating officer and a longtime executive as Allison’s replacement. Fannie Mae declined to comment.
Allison’s selection presents the administration with yet another challenge. If Allison is confirmed, both Fannie Mae and Freddie Mac would be without chief executives. David Moffett, formerly Freddie Mac’s CEO, resigned last month.
Some industry officials said that by pulling Allison away from Fannie Mae, the White House was signaling that TARP would remain a viable component of the government’s stabilization efforts for the financial industry, even in the face of hostile lawmakers and wary bankers.
“Designing the next leg of TARP proceeds to co-invest in legacy assets will require a deft touch and market knowledge to implement properly,” said Brian Olasov, a managing director at the McKenna Long & Aldridge law firm in Atlanta. “This fits Allison’s deep market experience well.”