Herb Allison, who has been chief executive of Fannie Mae since it was seized by the government last September, has been tapped to oversee the $700 billion financial rescue fund conceived to restore rattled markets, the White House said on Friday.

Allison must be confirmed by the Senate before he can succeed Neel Kashkari and become Treasury assistant secretary for financial stability. In that role, Allison will be charged with overseeing several federal programs meant to improve the availability of credit, aid major automakers and boost the housing market.

Allison was named CEO of mortgage finance company Fannie Mae in September as the housing market soured and pushed the company and its sibling agency, Freddie Mac, to the brink of collapse.

He had spent more than 25 years with Merrill Lynch before becoming chairman and chief executive officer of pension fund giant TIAA-CREF.

After six years as the head of TIAA-CREF, Allison retired in 2008 and was asked by former Treasury Secretary Henry Paulson to become conservator of Fannie Mae, the nation's largest source of housing finance.

In early April, Allison defended Fannie Mae's bonus payments to several thousand employees as lawmakers on Capitol Hill were scrutinizing payments made to executives at failed insurance giant American International Group Inc; both companies received billions of dollars in government bailout funds.

Allison has told Fannie Mae colleagues that his long experience and personal wealth have given him valuable independence when it comes to managing the nation's largest source of mortgage finance.

(By Patrick Rucker; Editing by Leslie Adler)

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