Paulson Officially Turns Over the Mortgage Crisis to Obama

In a Wednesday statement, outgoing US Treasury Secretary Henry Paulson pointed to President-elect Barack Obama as the "decision maker" for the allocation of the balance of $700 billion in TARP bailout funds.

Although a few weeks from inaugurationPaulson has handed off the bailout fund that has already injected $354 billion into capital for banks, loans to automakers, and various rescues to financial institutions and consumer credit.

The Paulson Treasury will continue to work on plans for the future allocation of the remaining TARP funds. However, Paulson was clear in asserting that these plan would be merely recommendations to the Obama transition team.

The Treasury Department must formally request the second $350 billion tranche of TARP funds from Congress--a task that will be left to the new Obama administration.Paulson assured the questioners following his speech that he would be collaborating with successor Timothy Geithner, and would help to expedite the request if asked.

Paulson's recommendations in today's statement included turning Fannie Mae and Freddie Mac in to a "public utility-like" mortgage guarantor andsecuritizer. This continues to raise the discussion as to the appropriate amount of government subsidy for a healthy housing market. Paulson in earlier statements, seems to believe there must be a firm decision between private or public stating, "any middle ground is a recipe for another crisis."

Short-term crisis demands Fannie Mae and Freddie Mac remain in government hands, but it will be interesting to see the direction Obama holds or turns on these recommendations.