America hopes it will be Super Hank to the rescue

In everyday life these heroes are puny scientists like Peter Parker who becomes Spiderman whenever a villain needs trapping in a web; or stuttering pencil-necks like Clark Kent, Superman's alter ego.

So it is with Henry "Hank" Paulson, the former Wall Street banker who turned Treasury Secretary at the tail end of the flagging Bush administration.

With just two years to make his mark and waning Republican support in Congress, frankly not much was expected of Paulson. But as the American economy continues its steep decline and banks and other institutions fall victim to the evil villain Credit Crunch, Paulson is shaping up to be a true super-hero in his own right. Given the close links between the US and other Western economies, we too could depend on Paulson's success - or failure.

The surprises began in August 2006, a few weeks after Paulson was officially sworn in as Treasury Secretary. He stunned Washington and Wall Street by revealing a list of four long-term economic priorities for his office to tackle. He wanted to help create a new energy policy that addressed global warming; to fix global trade and investment policy; to reform social security and health care for the poor; and, perhaps most surprisingly, to address the growing income gap between rich and poor in America.

For a life-long Republican, who had previously been the chairman and chief executive of investment bank Goldman Sachs and was appointed to the Treasury by President George W Bush, such a radical agenda took everyone by surprise. Indeed, Paulson was the only member of the Bush Cabinet who dared to acknowledge that human actions contribute to global warming and that America should take swift action to address it. To talk of an income gap when all others in the administration were still slapping themselves on the back for maintaining economic growth at all costs was tantamount to heresy on the right wing of the Republican Party.

But as one of the most forthright intellects on Wall Street in his day, Paulson was not accustomed to tempering his views for anyone. And besides, after his appointment Paulson barely had two years of the administration remaining so it was hardly likely that he would be able to achieve even a tiny fraction of such a lofty manifesto.

So why bother? The four-point plan was Paulson's first of many deft political moves. A savvy declaration of unity with the Left to ensure that, should he ever need swift and decisive support from Democrat-dominated Congress,he would be in with a better chance of getting it.

In building such crucial support in Congress, Paulson was paving the way for his true agenda, one with which he actually had a chance of making his mark in the two short years available.

In April this year, with the economy in free fall and the credit crunch andhousing slump in full swing, Paulson announced a plan for complete reform of the nation's financial regulators. In so doing he has completely transformed the Federal Reserve from an interestrate obsessed think-tank to a powerful regulator of regulators with a hand heavy enough to calm Wall Street and instill the markets with confidence.

However, that was just the start of it.

Events overtook his plans for reform and all of a sudden Paulson was in the middle of an economic firestorm the likes of which he had never imagined. But, safe in the knowledge that he had broad support in Congress he moved quickly to reverse a panic-driven investor flight out of Fannie Mae and Freddie Mac, two giant companies that are between them the backbone of America's housing market. Together, they guarantee some $5 trillion (£5000 bilion) of mortgages - almost half the US market.

Paulson was the key driver behind last week's rescue package for Fannie and Freddie, which not only ( eventually) stopped the panic sell-off of shares in both companies but further strengthened the Fed's hand as a market regulator.

On top of all that, he negotiated a deal between the biggest banks in America to back dodgy mortgage-backed securities; he sternly convinced the mortgage industry to extend a helping hand to those facing foreclosure and all but orchestrated the sale of collapsing Bear Stearns to JPMorgan.

Indeed, in every financial calamity of this deepening slump Paulson has flown to the rescue with a solid governmentbacked proposal that has, so far, restored confidence to some degree and not rewarded failure so much that the market abandons all scruples.

There are those who say his proposals do not go far enough, or, as with the Fannie and Freddie rescue package, present too much of a potential burden to the taxpayer. But Paulson does not expect Fannie or Freddie ever to draw upon the billions of dollars he has made available to them.

He merely expects the notion of government backing to be enough to provide these institutions and the markets with the confidence they currently lack to get back to business as usual.

As he said himself before Congress this week: "I think that if you have a squirt gun in your pocket you may have to take it out. If you have a bazooka in your pocket, and people know you have a bazooka, you may never have to take it out."

All we have to do now is find a suitable name for this recession-busting super hero.

There is always Goldman - the name of his old bank - but you could say that one is already taken. Maybe he will settle for something simple like Super Hank. First, let's see if he can live up to that name. It is too soon to say the worst is over.