WASHINGTON, DC -- In an effort to protect and reimburse taxpayers who will be exposed by the Bush bailout of Wall Street, U.S. Senator Jack Reed (D-RI) has drafted a plan to ensure that taxpayer risk is significantly reduced and the institutions that brought us to this point pay for the costs of the bailout when they are able.

The New York Times noted Reed's Taxpayer Protection & Reimbursement provision "would grant the government warrants to purchase stock in companies that participate in the bailout plan, so that taxpayers might be able to profit should the firms flourish after selling their bad debts to the government."

"This is a mechanism that recognizes the need to help troubled companies recover, but it also allows the taxpayer to get paid back as the companies profit. This is essentially what the Federal Reserve did when it aided AIG, so this is not some type of unorthodox financial deal. Tax payers should not be forced to assume all the risk and then let the companies get all the reward. That is not fair in any kind of deal. The focus should be on tax payer protection and reimbursement," said Reed, a senior member of the Banking Committee.

Reed's provision includes the following features:

  • Government is guaranteed non-voting shares in the future, in proportion to the amount of troubled assets individual firms pass on to the government.
  • Refunds taxpayers for the administrative costs of the bailout and any losses realized from troubled assets.
  • Ensures a higher rate of payment to taxpayers - stocks should appreciate better over time.
  • Government will sell non-voting shares to recover losses for buying, managing, and disposing of troubled assets.
  • Government will not have ownership rights with these shares—it is not the government owning corporations, but cashing in non-voting shares to cover the costs of the bailout and potential losses from troubled assets.