Current Position: Assistant Secretary for Financial Stability (since June 2009)
Credit: Justin Sullivan/
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Why He Matters
When Bush Treasury Secretary Henry Paulson announced that Neel Kashkari, 35, would head the Troubled Asset Relief Program (TARP) in October 2008, many criticized the selection because of Kashkari’s youth and lack of experience. President Barack Obama’s choice to monitor the TARP funds, Allison, 66, will not face the same criticism.
Allison, a former Navy officer, headed Fannie Mae before taking the Treasury position. He took over the struggling company in September 2008, after Paulson pleaded with Allison to accept the job.
With all the media coverage of excessive executive bonuses, Allison was the rare exception; he took over Fannie while refusing a salary or bonus package. Allison was a candidate for the TARP position since vetting began, but he was not the Obama administration’s first choice, in part because the administration had to seek a replacement at Fannie.
At a Glance
Current Position: Assistant Secretary for Financial Stability (since June 2009)
Career History: Fannie Mae CEO (September 2008 to June 2009); CEO of Teachers Insurance and Annuity Association College Retirement Equities Fund (2002 to 2008); CEO of the Alliance for Lifelong Learning (2000 to 2002)
Birthday: Aug. 24, 1943
Hometown: Pittsburgh, Pa.
Alma Mater: Yale University, B.A. (philosophy), 1965; Stanford University, MBA, 1971
Spouse: Simin Nazemi
Religion: N/A
DC Office: N/A
State/District Office: N/A
Email N/A
Web site
Path to Power
Born in the steel capital of the U.S., Pittsburgh, Pa., Allison’s parents moved the family to Long Island, N.Y., when he was young, which is where he grew up. Allison attended Yale University, majoring in philosophy. But he didn’t take the law degree route like many philosophy majors. Instead he joined the Navy in 1965, serving for four years as an officer. His stint in the armed forces included one-year fighting in Vietnam.
Merrill Lynch
After ending his naval service, Allison went back to school, earning an MBA from Stanford University in 1971. He immediately joined the Wall Street investment bank Merrill Lynch as part of the account executive training program. A year later, the company sent him to Paris, France. He stayed only a year before moving to Tehran, Iran, to provide financial advice to Merrill Lynch customer, the Industrial and Mining Development Bank of Iran. He stayed in Iran for several years, starting Merrill Lynch’s office in Tehran and meeting his wife, Simin Nazemi. Simin’s father wouldn’t let the couple marry until Allison learned Farsi.
Allison moved back to New York in 1978 as an assistant to Merrill Lynch’s president. From 1980 to 1993, he worked in a variety of positions from treasurer to senior vice president of human resources and chief financial officer, at which point he became head of the investment banking division of Merrill. In 1997, he became Merrill’s president and chief operating officer, and was known as one of the advocates of moving Merrill into online trading.
TIAA-Cref
In 1999, Allison was denied the CEO position at Merrill, so after 28 years he stepped down. After leaving he was offered the top post at several other New York financial entities, but he turned them all down, and instead, surprisingly chose to head the Alliance for Lifelong Learning, a non-profit that provided online courses for college alumnae, including Yale, Stanford and Oxford. He stayed at the non-profit for a few years, before, in 2002, taking the top position at the Teachers Insurance and Annuity Association College Retirement Equities Fund (TIAA-Cref).
The non-profit company that handles millions of pension funds for professors, private-school teachers and hospitals had never endured lay-offs in its 85-year history. But with new competition, Allison had to cut costs. In 2003, he axed around 500 employees from the 6,500 person staff. He also increased total assets of the company by 68 percent to $435 billion by 2007. Allison did come under fire while at TIAA-Cref for his compensation package, which gave him $8 million in annual salary in 2003.
Retirement…Kind of
Allison stepped down in 2008, expecting to retire. But that plan didn’t last long. Allison was vacationing in the Caribbean when he got a call from Paulson. Bush’s Treasury secretary asked Allison to take over Fannie Mae, which had essentially been overtaken by the government after mortgage-defaults crippled the company. “I didn't have any time to deliberate, so I made a decision on the phone," said Allison. “I felt like saying no was not an option.” He accepted the position, but refused a salary.
The Issues
Allison’s nomination came days after Obama Treasury Secretary Timothy Geithner announced that banks receiving TARP funds would undergo “stress tests” to evaluate whether the government would be able to withstand current economic conditions without further government funds. If the banks began to falter again, the Treausury would be forced to fork over more TARP money. In May 2009, the results of the stress tests were released. Early estimates projected banks would need over $100 billion, but the results showed only 10 of 19 banks needed to raise $75 billion. Some banks were allowed to begin paying back TARP funds.
By September 2009, the economy showed more positive signs of recovery. In testimony to the Senate Banking Committee, Allison warned that although signs are good, the economy is still weak. "The recovery has just begun, the financial system remains fragile, and the credit markets are not fully functioning," said Allison.
"We still have a long way to go before true recovery takes hold, but we are now pointed in the right direction."
Fannie Mae
One reason Allison's nomination was delayed related to his work as the head of Fannie, a government-sponsored entity (GSE) that, combined with Freddie Mac, backs or owns more than 50 percent of U.S. home mortgages. With Allison leaving the top spot at Fannie, the administration would need to find a reliable replacement. Fellow troubled mortgage-finance company Freddie Mac also needed a chief executive after its CEO announced his resignation in March 2009.
Nonetheless, Allison’s work at Fannie might have prepared him for bureaucratic life since the company has basically been a government subsidiary since the government took a nearly 80% stake in Fannie during the financial crisis.
After playing a significant role in backing risky mortgage securities, both Fannie and Freddie have survived the 2008-2009 financial crisis because of government capital infusions. Now, any decision by Fannie or Freddie’s CEOs has to be approved by the Federal Housing Finance Agency (FHFA), which was created in October 2008 to monitor Fannie and Freddie, along with 12 federal home-loan banks. The FHFA has the final word on anything that includes hiring, firing and compensation of senior Fannie and Freddie executives. Allison has described the Fannie post as a “public- service job,” and he may have just been practicing for the larger task of managing TARP.
Layoffs
Twice in Allison’s career, he has made the controversial decision to lay-off workers. In 1998, when he worked as Merrill Lynch’s president and chief operating officer, as recessionary pressures began to hurt the investment firm’s growth, Allison decided to lay-off 3,400 employees. This decision meant the firm would be letting go of top Wall Street talent, which could hurt the firm once the economy rebounded. That’s exactly what happened in 1999. As the economy improved, the firm had to quickly hire more analysts in order to take advantage of the more favorable climate. Allison’s move to shed thousands of employees contributed to the Merrill board’s decision to decline offering him the CEO position.
In September 2003, while Allison headed TIAA-Cref, he made the decision to cut 8 percent of the non-profit’s workforce. It was the first time that job cuts occurred in the pension plan system’s history. These job cuts brought more ire from employees and the media, once it became public that while Allison was pushing these job cuts in order to cut costs, he was taking home more than $8 million in annual salary and bonuses.
The Network
Allison will join Geithner at the Treasury, but it won’t be the first time the two have worked together. Allison served on an advisory committee to the Federal Reserve Bank of New York, which Geithner presided over prior to joining the Treasury.
While Allison was vacationing in the Caribbean, Bush Treasury Secretary Henry Paulson called Allison to offer him a job as Fannie Mae chief executive.
In 2000, Allison was the national finance chairman for John McCain’s presidential campaign.
Allison used to serve on the board of directors at the Business Roundtable, and his time coincided with that of Roundtable President John Castellani.
Campaign Contributions
Allison has donated more than $110,000 since 1994. His money has gone to both Democratic and Republican candidates. In 2008, Allison donated $2,300 to
Obama’s presidential campaign. That came eight years after Allison was
John McCain’s 2000 presidential campaign finance chairman. Allison did not donate personally to McCain’s 2008 presidential campaign.
