UPDATE 2-Obama to tap Fannie Mae CEO to head TARP -source

NEW YORK, April 13 - The Obama administration is expected to name Fannie Mae Chief Executive Herb Allison to head the U.S. government's $700 billion financial rescue program, a source familiar with the matter said on Monday.

The announcement is expected "in coming days," the source said, adding that Michael Williams, Fannie Mae's chief operating officer, is expected to be named as Allison's successor.

The Wall Street Journal first reported on its website that U.S. President Barack Obama could announce his intention to nominate Allison as assistant secretary for the office of financial stability as early as this week.

Allison's name has been on the short list from the beginning as the government looked for someone to run the Troubled Asset Relief Program, the Journal said, citing people familiar with the matter.

Several factors complicated his selection, including the need to replace him at Fannie, the paper reported, citing sources.

Allison, a veteran banker and former president of Merrill Lynch, led the TIAA-Cref pension fund before being appointed Fannie Mae CEO in September.

Fannie Mae representatives were not immediately available for comment.