Herbert Allison Jr., the onetime president of Merrill Lynch & Co. who oversaw the U.S. government's bank-bailout program following the financial crisis that led to his former company becoming a unit of Bank of America Corp. (BAC), has died. He was 69.
He died Sunday at his home in Westport, Connecticut, his son, Andrew, said Monday in an interview. The cause was a possible heart attack, he said.
Allison brought an insider's knowledge to the U.S. Treasury Department when in June 2009 he became assistant secretary for financial stability under Timothy Geithner, overseeing the Obama administration's changes to the Troubled Asset Relief Program. He said he believed the largest U.S. banks had become too big, and were serving too many different masters, even before the financial meltdown of 2008 froze credit and crashed markets.
"Because of Herb's extensive experience and sound leadership, TARP became one of the most successful financial rescue programs ever created, and our nation avoided a second Great Depression," Treasury Secretary Jacob Lew said today in a statement.
Allison's 28-year tenure at Merrill Lynch, starting fresh out of business school at Stanford University, seemed destined to end with him as chief executive. He settled for the company presidency when, in January 1995, then-CEO Daniel Tully named David Komansky as his successor. Four years later, in 1999, he resigned after being informed he would not become CEO.
From 2002 to 2008, he was chairman and CEO of New York-based TIAA-CREF, a retirement-plan investment manager for teachers and others in academic, research, medical and cultural fields.
In 2008 he accepted Treasury Secretary Henry Paulson's invitation to become CEO of Fannie Mae, which had been placed under government conservatorship.
President Barack Obama nominated Allison to run the Treasury Department office overseeing the $700 billion rescue of the U.S. banking system. Confirmed by the Senate in June 2009, he succeeded Neel Kashkari, who had been appointed by George W. Bush.
Allison stepped down on Sept. 30, 2010, as the Treasury Department was shutting down the spending phase of the TARP program. Though highly unpopular politically, the TARP program ended on a positive note, with the Obama administration reporting the $700 billion rescue plan would actually cost taxpayers about $50 billion on a net basis.
"When all is said and done, this program will be viewed as one of the most effective and least costly forms of assistance" in the financial crisis, Allison said as he was leaving his post.
In "The Megabanks Mess," an electronic book released in 2011, Allison warned that his former industry was already rewriting history to downplay the crisis they had faced.
"The truth is quite different," he wrote. "All of America's largest banks faced catastrophic failure in the fall of 2008. Even though some of those banks had controlled their risk exposures and liquidity better than others did, even they were saved only by massive, unprecedented outpourings of government assistance."
Even before the financial crisis of 2008, Allison had concluded that the largest U.S. banks JPMorgan Chase & Co. (JPM), Bank of America, Citigroup, Wells Fargo & Co., Goldman Sachs Group Inc. and Morgan Stanley had become too big and needed to be broken up, according to an interview he gave in 2011 to American Banker.
"I think there's plenty of evidence that their business model the diversified financial services company has become obsolete," he said, according to American Banker.
Herbert Monroe Allison Jr. was born on Aug. 2, 1943, in Pittsburgh. His father, Herbert Sr., retired in 1952 as an agent for the Federal Bureau of Investigation. His mother was the former Mary Boardman.
He received a bachelor's degree in philosophy from Yale University in 1965. He entered the U.S. Navy as a commissioned officer in 1965 and served a tour in Vietnam. He left the Navy in 1969 as a lieutenant.
Allison joined Merrill Lynch after earning his MBA from Stanford in 1971 and served as treasurer, head of human resources, chief financial officer and head of investment banking.
In October 2011, the administration named Allison to head an independent review of government loans to energy companies. The move was in response to a congressional investigation into Solyndra LLC, the California solar-energy equipment maker that announced it was filing for bankruptcy in August 2011 after having received a $535 million Energy Department loan guarantee.
Survivors include his wife, the former Simin Nazemi, whom he married in 1974; sons John, a New York-based fiction writer, and Andrew, founder of Main Street Hub, an Austin, Texas-based social-media management company; and a brother, George Allison.
