Herbert Allison's expected move from Fannie Mae's executive suite to the Troubled Asset Relief Program (TARP) is raising questions about how the Obama administration views the top positions at the government-sponsored enterprises.

Since Fannie and Freddie Mac were put into conservatorship in September, their chief executive officer roles have undergone a makeover. The CEOs once touted their role in the mortgage market and were major players in debates over the GSEs' futures on Capitol Hill. Now the executives do the bidding of the administration and have to run decisions by James Lockhart, the director of the Federal Housing Finance Agency (FHFA).

Observers said that if it picked Allison as TARP director, the White House would send a message that the CEO position is irrelevant at the GSEs.

"Fannie and Freddie are of lower priority in terms of the urgent decisions that need to be made," said Tom Stanton, a fellow of the National Academy of Public Administration. "From the perspective of the White House, you could believe that Jim Lockhart is in charge, and therefore these companies will continue to operate, even with some departures."

That sentiment is underscored by the fact that the administration is taking Allison away from Fannie while Freddie is searching for a new CEO. David Moffett, who was installed at Freddie after the conservatorship, resigned last month, reportedly because of frustration that he had little control over the company. "This just confirms that you can have vacancies in the CEO job at Fannie and Freddie. It really doesn't matter," said a source familiar with the GSEs, who requested anonymity. "It wasn't Allison's show or Moffett's show. It's Lockhart's show."

Speculation that Allison would become TARP director has been rampant in recent weeks. Several news reports have said the White House is ready to announce the move as early as this week. Representatives for Fannie and the FHFA would not comment for this story. A Treasury Department spokesman did not address Allison directly, but said the administration "is committed to maintaining confidence in [the GSEs'] missions, their leadership, their strong management teams, and their financial condition."

Some sources said Allison was seeking to leave Fannie before it announces more losses in the coming months. It lost $58.7 billion last year.

The administration is clearly aware of the role Fannie and Freddie play in the mortgage market; the GSEs are key to the White House plan to modify mortgages. Moreover, after a housing roundtable with troubled borrowers at the White House last week, President Obama noted that Fannie and Freddie have helped lower mortgage rates and spur foreclosures.

Still, another GSE executive vacancy would likely highlight the confusion about what exactly a CEO does at a company under government conservatorship. There is no bright line between the issues a CEO can handle independently and those requiring input from Lockhart.

Jim Vogel, the head of fixed-income research at First Horizon National Corp.'s First Financial Capital Markets Corp., said the CEOs now must essentially keep the ship intact. "The nature of the job has changed to … an internal focus on employee retention and development," he said.

Bert Ely, an independent consultant in Alexandria, Va., and a GSE critic, said the CEOs are effectively chief operating officers.

"Really, it's more a matter of policy execution versus establishing policy or establishing business strategy," he said. "There's no business strategy there. It's more of a matter of they have to do what they're told to do, and a matter of how well they can execute."

Allison told American Banker in an interview last month that he still had plenty of control over Fannie. "I manage the company on a day-to-day basis, just like you would with only a board of directors," he said.

But Peter Wallison, a fellow at the American Enterprise Institute, said the administration is acknowledging the obvious. "They're looking at the situation and saying, 'We don't need him at Fannie, because he's just taking orders from Lockhart,'" said Wallison, a GSE critic. "The administration doesn't see any reason to leave talent in a place where it's not going to be used."

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