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Famed hedge fund manager and billionaire George Soros on Wednesday offered his opinion of the financial bailout plan currently before the Senate: " It was ill-conceived -- or more accurately, not conceived at all," he said.

Soros blasts Treasury Secretary Henry Paulson's plan because, he argues, it favors Wall Street over Main Street by targeting the credit crisis while ignoring the foreclosure problem. In an op-ed piece in The Financial Times, Soros suggests an alternative rescue plan.

First, however, Soros assails the current proposed plan for its haphazard solution to the problem:
"Two weeks ago the Treasury did not have a plan ready -- that is why it had to ask for total discretion in spending the money... The idea was fraught with difficulties. The toxic securities in question are not homogenous and in any auction process the sellers are liable to dump the dregs on to the government fund."

Soros' plan would recapitalize banks along the lines of the deal signed by Goldman Sachs ( GS) and renowned investor Warren Buffet. Buffet's Berkshire Hathaway ( BRK.A) invested in Goldman by purchasing preferred shares and warrants for common stock.

Soros highlights the greater effectiveness of equity. Not only would banks be able to leverage the equity and start lending again, but private investors would be attracted to invest as well. The plan would ensure that banks turn to private lenders first. If private money were unavailable, public funds would be utilized.

The public money would go to preferred shares with a reasonable coupon of 5%. "The rights would be tradeable and the secretary of the Treasury would be instructed to set the terms so that the rights would have a positive value," Soros wrote.

Soros also proposes help for homeowners. He recommends allowing the Treasury to finance renegotiated mortgages based on the low-cost lending provided by the government. The plan would prohibit fees for foreclosure by mortgage services and provide incentives for renegotiation of mortgages.

Soros' rescue plan has distinct benefits. It would obviate the need for the government to analyze the value of a myriad of opaque and unusual financial contracts that have plagued financial institutions. Taxpayer money would be invested more efficiently and with much less financial risk. Finally, it would help stop the hemorrhaging in the housing market by deterring foreclosures.

Soros has been a controversial figure in the political arena. Republicans have hammered him for his support of Democrats, including his involvement in partisan political action groups like America Coming Together (ACT). He has endorsed Sen. Barack Obama (D., Ill.) in the presidential race. Soros reportedly has contacted Obama's campaign about Obama's plan along with Democrats in Congress.

The Senate votes today on a plan slightly different than the one that failed in the House on Monday. The Senate version includes greater FDIC protections to consumers -- up to $250,000 for deposits rather than $100,000 -- and a fix for the alternative minimum tax.

Should it fail, the Congress could have a reasonable alternative in Soros' rescue plan.

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