The Administration wants to put longtime Merrill Lynch executive Herb Allison in charge of the $700 billion TARP program. Allison is currently the CEO of Fannie Mae (FNM), a job entrusted to him when the mortgage company was in deep trouble.
The question is what will Allison do in his new job?
According to The Wall Street Journal, "If confirmed, Mr. Allison will become point person for what has become an unpopular program. He'll have to defend plans for spending the program's remaining cash, and would likely represent the administration if it requests more bailout funds, which many observers expect." (See "Four Steps to Ending the Foreclosure Crisis.")
Allison may end up finding that he does not have much to keep him occupied in the new role. Several powerful members of Congress have indicated that they will not approve new TARP funds until there is a detailed accounting of where the first $700 billion from the program went. That could take months and, at that point, Congress could still refuse extra money. Allison can help in the detective work, but that would seem to be a waste of his skills.
The TARP oversight committee appointed by Congress has already signaled some hostility about how the program has been managed which will not help Allison do his job. Elizabeth Warren, chairwoman of the Congressional Oversight Panel, has expressed grave concern about whether banks which received government money are setting exorbitant fees and interest rates for their customers. There is also a concern that the new program to buy toxic assets from banks is not set up properly to get fair value for those assets.
With charges financial firms misusing the money that the government has given them and concerns that they will be poor stewards of capital that they might receive once the results of the Administration's "stress test" of banks is done, Allison might as well stay at Fannie Mae.
Douglas A. McIntyre
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