By Alexander Bolton
Posted: 09/30/08 11:19 PM [ET]
The billionaire financier George Soros, a major Democratic financial backer, is floating his own rescue plan among Democratic lawmakers who are uncertain what to do in the wake of a surprise defeat of a proposed $700 billion rescue package proposed by Treasury Secretary Henry Paulson.
Soros has outlined his plan in an opinion editorial in the Financial Times and circulated a concept paper among decision-makers.

Soros described the plan he outlined in his concept paper in an opinion editorial that appeared in the Financial Times early Wednesday morning, Greenwich Meridian Time.

http://thehill.com/leading-the-news/soros-floats-alternative-bailout-plan-with-dems-2008-09-30.html

“Instead of purchasing troubled assets, the bulk of the funds ought to be used to recapitalize the banking system,” Soros wrote.

“The Treasury secretary would rely on bank examiners rather than delegate implementation of [the Troubled Asset Relief Program] to Wall Street firms,” he wrote in reference to the plan first crafted by Treasury Secretary Henry Paulson. “The bank examiners would establish how much additional equity capital each bank needs in order to be properly capitalized according to existing capital requirements.”

“The recapitalized banks would be allowed to increase their leverage, so they would resume lending,” he wrote.

Soros has emerged as a harsh critic of the Treasury Department, especially of Paulson’s proposal for the government to buy $700 billion of distressed mortgage-backed securities to restore the flow of credit in the financial markets.

It is unclear whether his entry onto the debris-strewn field of the debate will help lawmakers reach agreement on an alternative proposal or further anger House Republicans, who blew up a compromise plan on the House floor Monday.

“The two main principles are to inject more cash into the securities market and shore up home mortgages,” said Moran, who has been briefed on the proposal. “He thinks it has to be more direct than the government buying up tranches. He doesn’t think the government should be buying up toxic stock.”

“There are a lot of people with ideas, I’m going to look at what they want,” said Moran, who added that he also scheduled a meeting with Robert Dugger, managing director of Tudor Investment Corporation, a fund connected with the billionaire trader Paul Tudor Jones.

Soros, who is widely regarded as a financial wizard, could jumpstart congressional negotiations in a new direction, especially now that some strategists believe the Paulson-based plan that failed Monday will be difficult to revive.

One banking industry lobbyist said it would be very difficult politically for Republicans who voted against the package Monday to change their minds and vote for it a few days later. More than two thirds of the House Republican conference voted against the plan, which failed by a vote of 228-205.

Michael Vachon, Soros’s spokesman, said: “There have been a lot of conversations going on about the Paulson plan and George has been very critical of it.”

Democrats are fond of Soros, who has emerged as one of the party’s biggest financial backers in recent years. He spent close to $24 million to defeat President Bush in the 2004 election.

For this reason Soros is a bogeyman among many Republicans. He clashed famously with former Republican Speaker Dennis Hastert (Ill.).

During the 2004 election Hastert questioned the source of Soros’s wealth and suggested it could have links to the drug trade.

Soros has fiercely criticized Paulson’s proposal.

Funny thing is it sounds like a better deal for the tax payer.

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