UPDATE 1-Cohen withdraws from Treasury consideration-sources

(Updates with second source, details on nomination process)

WASHINGTON, March 12 (Reuters) - Prominent Wall Street lawyer H. Rodgin Cohen has withdrawn from consideration to become deputy U.S. Treasury Secretary, Democratic sources said on Thursday, dealing another setback to the department's efforts to fill critical positions.

The sources, who spoke on condition of anonymity, said vetting issues came up in the final stages of considering Cohen for the job.

Cohen, who has been with the New York law firm Sullivan & Cromwell for nearly 40 years, could not immediately be reached for comment.

He has been a major influence on the bank rescues and mergers that have reshaped Wall Street in the past year and has advised nearly every top financial firm, including recent work for Fannie Mae (FNM.N), Lehman Brothers (LEHMQ.PK), Wachovia Corp, American International Group (AIG.N) and JPMorgan Chase (JPM.N).

Cohen is the second person to withdraw from consideration for the No. 2 job at Treasury after former Securities and Exchange Commissioner Annette Nazareth decided to drop out last week. Top candidates for undersecretary positions have also withdrawn from consideration.

However, a person familiar with the Treasury's nomination process said there were multiple candidates being considered for all of the open positions at the department.

While delays in filling senior jobs are not uncommon in the months after a new U.S. president takes office, these difficulties have gained more attention because the Treasury is battling the worst financial crisis since the Great Depression and is trying to develop critical new measures to remove problem assets from bank balance sheets.

U.S. Treasury Secretary Timothy Geithner is working with a close circle of advisers on domestic and international policy initiatives, and expects to detail a much-anticipated bank asset plan in the coming weeks.

He said on Thursday he would also unveil a new regulatory revamp plan before a congressional hearing on March 26. For full story, see [ID:nN12369628]

The Treasury has brought in temporary help to fill the void and is continuing to employ some people appointed by previous Treasury Secretary Henry Paulson.

Edwin Truman, a former Treasury assistant secretary and Federal Reserve economist, has returned to the department for a six-week stint.