Herb Allison, chief executive of Fannie Mae, the US government-controlled mortgage group, is leading the shortlist to run the Obama administration’s $700bn bail-out fund.

However, the former Merrill Lynch executive still has several hoops to jump through before replacing Neel Kashkari as head of the troubled asset relief programme, according to people familiar with the matter.

Kashkari, an appointee of the previous Bush administration, was asked to stay on by Tim Geithner, Treasury secretary, while a search continued for a replacement to control the Tarp, which has been used to prop up the stricken banking sector.

Financial Times