With Treasury’s $250 billion bank investment plan, and notice served on Congress that an additional $100 billion will be tapped to acquire toxic assets, taxpayers have quickly learned how half of the $750 billion bailout package will be spent.

Treasury’s approach has been, by necessity, flexible. Secretary Paulson was initially opposed to federal ownership stakes in banks before he forcefully sold such a move to the nine largest, most influential banks in the country just a few days ago. This package included taxpayer protections, mechanisms to encourage buyouts (with interest) of taxpayer shares, and some limitations on dividends and executive compensation, but it bears watching. Also, by making largely healthy “big dog” banks accept $125 billion in taxpayer investments, smaller institutions can tap the remaining $125 billion with less fear of being viewed as weak. And by only taking relatively small stakes through privileged shares, potential investors have less fear that their stakes in banks will be wiped out or diluted by a large federal infusion of cash (as happened with AIG).

The next step is what was originally the centerpiece of the Paulson plan – the acquisition of “toxic” assets from institutions. Assistant Secretary Kashkari, who is leading the program, has issued guidance and instructions and awarded Bank of New York Mellon a three year contract to be custodian and accountant of the asset portfolio.

The Government Accountability Office (GAO) has assembled a 20-person team to review implementation and operation of the program and is expected to report regularly to Congress.

The largest government market intervention since the 1930s is moving forward. History will tell whether this was a good or bad decision. While we wait for history’s verdict, Taxpayers for Common Sense will be closely monitoring taxpayers’ investments and risks very closely and will be quick to target any insider dealing as this goes forward. We encourage you to join us and tell us your thoughts. The stakes are too high to accept business as usual.