A plan to recapitalize the American banking system circulated by George Soros, the billionaire financier and major Democratic backer, received mixed reviews in the Senate on Wednesday.

Two members of the Senate Banking Committee voiced cautious support for the core concept in Soros’s plan.

Sen. Mike Crapo (R-Idaho), a member of the committee, said he supported the idea of the government buying equity in troubled banks, giving them the capital they need to resume lending, which Soros has proposed.

Crapo said if taxpayers were given stock shares in return for a cash infusion to troubled companies, they would be safeguarded from financial loss.

“I personally think a better approach would be to have the taxpayer placed in an equity position, in a prior equity position, so that, in terms of a potential loss, the taxpayer would not be first in line [to pay off bad investments] but instead the owners of the institution and the bond holders of people who have extended debt for risky decisions,” said Crapo.

“The shareholders should be the last in line for any loss,” the senator added. “If that’s what he’s putting out there, there might be some merit to it, but I’d have to study it.”

Another Republican on the Banking Committee had trouble forgetting about the $24 million Soros spent in the 2004 election to defeat President Bush.

“I wish he would spend his own money on recapitalizing the markets instead of spending it on those nasty ads out there,” said Sen. Wayne Allard (R-Colo.).

Allard also said he worried that such a plan would lead to the government becoming majority owner in some companies, an outcome that critics might call the socialization of the private sector.

Specifically, Soros has proposed that Congress establish a Financial Reconstruction Corporation with capital of $500 billion to underwrite the recapitalization of the banking system. Under the plan, the corporation would provide equity capital to banks that have run short of funds.

Soros has also proposed mandating the Treasury Department to provide financing for renegotiating the terms of mortgage-backed securities. This would reduce foreclosures by helping homeowners adjust their mortgages to be more affordable.

Soros has also suggested a freeze on fees that mortgage service companies charge during the foreclosure process, which experts have identified as a significant financial incentive for these companies to foreclose on troubled mortgages.

Sen. Bob Bennett (Utah), the second-ranking Republican on Banking, said it would take too long to structure a financial reconstruction corporation such as Soros has proposed.

He said the Congress must act immediately.

But Sen. Jack Reed (D-R.I.), who has played a role in negotiations on the Wall Street rescue package, said Soros’s plan is not incompatible with the legislation the Senate is expected to pass Wednesday evening.

Reed said the Senate bill gives Treasury Secretary Henry Paulson enough latitude that he could decide to buy toxic assets from troubled firms, as the administration first proposed, or he could buy equity stakes in these companies, as Soros wants.

“The way this bill is structured, the secretary of the Treasury has a great deal of flexibility,” said Reed.