HERB ALLISON, chief executive of Fannie Mae, the US government-controlled mortgage group, is leading the shortlist to run the Obama administration’s $700 billion (€527.1 billion) bailout fund.
However, the former Merrill Lynch executive still has several hoops to jump through before replacing Neel Kashkari as head of the troubled asset relief programme (Tarp), according to people familiar with the matter.
Mr Kashkari, an appointee of the previous Bush administration, was asked to stay on by US Treasury secretary Tim Geithner while a search continued for a replacement to control the Tarp, which has been used to prop up the stricken banking sector.
The delay – and the possibility that Mr Allison may yet withdraw or be eliminated from the process – underlines the difficulty of finding astute executives untainted by the economic crisis who are prepared to work for the government.
Mr Allison has been running Fannie Mae since the government seized control last September to prevent the mortgage group’s collapse. But if he leaves his current position, both Fannie and Freddie Mac, the second government-backed mortgage group, would be looking for permanent chief executives.
Freddie is hiring headhunters to find a replacement for David Moffett, who resigned as chief executive last month.
Mr Allison’s career history includes helping unscramble the debacle of Long Term Capital Management, the $80 billion hedge fund, while at Merrill.
Later, as chairman and chief executive of TIAA CREF, the pension fund giant, he cut costs and slashed the payroll. In the late 1990s he had been in the running for chief executive of Merrill but left in 1999 while chief operating officer, ending a fractious relationship with some fellow executives.
He turned to politics, serving as head of the finance committee for John McCain’s 2000 presidential campaign, and then moved to TIAA CREF.
During the early 1990s, as chief financial officer of Merrill Lynch, Mr Allison was also one of the first employers to tie compensation to the overall performance of the company.
Merrill’s retail brokers received incentive compensation tied to their own performance, and Mr Allison doled out a new form of compensation, dubbed “herbies”, which rewarded brokers for the overall performance of Merrill.
As Merrill’s fortunes rose during the decade, the “herbies” ended up paying off handsomely.
This legacy may come back to haunt him as head of the Tarp, as bonus compensation for executives at banks taking government money has come under fire.
– (Copyright Financial Times Limited 2009 )
