This morning we woke up to the news of a government bailout for Citigroup.  A bailout that would have the taxpayer holding the bag for the excesses of some greedy managers who ignored risks and pursued profit at all cost.  The summary of the term of the bailout as outlined below:  

NEW YORK, (Reuters) - The U.S. government moved to bail out Citigroup Inc, agreeing to shoulder most potential losses from $306 billion of its toxic assets and inject $20 billion of new capital, its biggest effort yet to prevent a big bank from failing.......
The $20 billion of U.S. government capital is in addition to $25 billion it injected into the bank last month. The government is buying preferred stock that will pay an 8 percent dividend.
In exchange for the bailout, Citigroup slashed its quarterly dividend to a penny per share from 16 cents. It cannot raise the dividend for three years without U.S. consent.  Even so, taxpayers are now on the hook for nearly $250 billion of losses resulting from the bank's missteps.
"The authorities will do whatever they feel is necessary to ensure that the Great Depression will not return," said Gavin Graham, director of investments at BMO Asset Management in Toronto. "The effect on confidence is too great." Graham manages about $50 billion and owns some Citigroup debt.
Citigroup will absorb the first $29 billion in losses on a $306 billion portfolio of loans and trading assets, plus 10 percent of any additional losses, for a maximum total exposure of nearly $57 billion. Treasury, the Federal Deposit Insurance Corp and the Federal Reserve would absorb the rest.
In return, Treasury and the FDIC will get $27 billion in preferred shares as well as warrants to buy $2.7 billion in Citi common stock at $10.61 per share. http://news.yahoo.com/s/nm/20081124/bs_n m/us_citigroup

I'm not against all bailouts.  I'm against dumb bailouts that privatize profits and nationalize losses; I'm against dumb bailouts that ignore the basic tenets of our market economy.  To the contrary, I like bailouts.  I believe that the Automakers should be bailed out if they present a reasonable plan of actions.

Having done my mandatory ranting, let's move ahead and introduce what I believe would be a novel formula for current and future bailouts of all and any corporation in all or any industry:

It's a 15-20 years amortization of cumulative losses.  This is an accounting tool that would keep private losses private while helping the economic system to stabilize in the long run:  Let's take for example the current Citigroup bailout and re-write it with this model:

Current Bailout Plan and distribution of current and future losses (in Billions):

Total potential losses             $     306 or 100%
Citi's share of the losses     $      57  or    19%
Taxpayers' share of the losses     $     249  or    81%

Proposed Bailout Plan and Distribution of Current and Future Losses:       
Total potential losses             $     306 or    100%
Citi's share of the losses     $     306  or    100%

Let's assume that Citi eventually sold all those assets at $150 billion.  This scenario would result in a $156 billion in losses to Citigroup.  Because Citi might not be in a position to absorb this huge loss in a single year and still maintain a viable business, it is allowed to capitalize it as a long term liability on its book, and amortize the cumulative-losses over a period of 15 years.  In the meantime, the government would give Citi a loan equal to the cumulative-losses ($156 billion) at say 8% as a working capital replacement to help Citi to slowly and methodically absorb the cumulative-losses over 15 years.  This capital replacement would be amortized over the life of the amortizable cumulative-loss, matching loss recognition to Fed-loan repayment.

Potential Taxpayers' bailout contribution in this scenario would be equal to the amount of capital provided to Citigroup to cushion the capital loss from the sales/liquification of the $306 billion assets.

Balance Sheet treatment of this special sale should be as follows:

Credit to $306-billion-asset-account for $306 billion (Asset Sales)   
Debit Cash for $150 billion (Asset)
Debit Amortizable Cumulative losses for $156 Billion (Asset)
Credit Government bailout capital injection $156 billion (liability)    
Debit Cash for $156 (Asset)

Thus the corporation's cash flow would receive a big boost from the transaction; potential liquidity problems solved; and corporate profitability lightly impacted in current period.