Treasury's TARP leader Allison resigns

Herbert Allison, who leads the Treasury Department office that oversees TARP, announced his resignation in an e-mail to his staff today.

Allison's departure means that the Office of Financial Stability, which manages the multi-billion bailout, will soon have its third leader in less than two years.

Allison was the second OFS head. He was preceded by Neel Kashkari, who was originally tapped to lead the office when it  was created in October 2008.

The resignation comes a day after after National Economic Council director Lawrence Summers announced he would leave the White House at the end of the year.

Allison said that he will be returning to his Connecticut home to join his wife, Simin, who did not move to Washington when Allison took over the job.

"This was not an easy decision, and I made it with a measure of regret," Allison said in an e-mail to OFS staff. "It has been my great privilege to serve our country together with you, the extraordinary professionals of the Office of Financial Stability, during a period of remarkable challenges."

Allison's resignation comes just a few days before TARP officially ends on Oct. 3. The Wall Street reform bill already ended Treasury's ability to take on new financial obligations earlier this summer.

Tim Massad, the Office of Financial Stability's chief counsel and chief reporting officer, will serve as the OFD acting head until a permanent replacement is selected. Massad, 54, officially takes over Sept. 30.

Before his job at Treasury, Massad spent 17 years as a partner at Cravath, Swaine & Moore LLP, a New York-based international law firm. Massad also worked from December 2008 to February 2009 as a special legal advisor to the Congressional Oversight Panel -- the government's TARP watchdog.

Now, he is in the unusual position of leading the office that the oversight panel has frequently criticized.

During a town hall meeting Wednesday, Treasury Secretary Timothy Geithner praised Allison for his service and noted that Allison chose to serve his country rather than enjoy retirement after serving as head of several major firms.

Allison has previously served as president of Merrill Lynch & Co. and chairman and CEO of TIAA-CREF, a provider of retireement and asset management services. Before taking over OFS, Allison was lured from retirement by the Bush administration in September 2008 to become president and chief executive of Fannie Mae, the mortgage finance operation that had been placed in government conservatorship.

"You knew that financial crises were about tough choices," Geithner said of Allison in prepared remarks delivered Wednesday. "You knew that the right thing to do was unfortunately the unpopular thing to do. And you knew that even if you did the job well - even if you did it perfectly - Americans would still hate the fact that you ever had to do the job at all."

Geithner praised Allison and his staff for keeping the cost of TARP down, noting that TARP is now estimated by the Congressional Budget Office to ultimately cost $66 billion -- much less than the $700 billions some once feared.

The secretary's statement regarding Allison read almost like a eulogy for the much-maligned TARP in its waning days. While critics have said that aspects of TARP have been mismanaged, most agree that the program was necessary.

"When TARP was created, the world around us was falling apart," Geithner said. "And in that moment; when our financial system was on the verge of collapse; when families and businesses were worried like never before about their basic economic security; leaders from both parties stood up, stood together, and, as Americans, did what was best for the country."

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