Why Hank faces tough questions about his $700 billion bailout plan

But to others his agenda strays so far from the basic rules of the free market that he is an un-American leftist agent forcing a socialist agenda on a fearful and powerless populace.

While such a portrayal of the former All-Ivy-League American football star, long-time donor to the Republican Party and ex-chief executive of Goldman Sachs sounds ridiculous, just listen how some of Paulson's former friends are describing his $700 billion bailout plan.

Senator Jim Bunning, a Republican from Kentucky, called it "socialism" and "un-American" shortly after declaring "the free market for all intents and purposes is dead in America". Others have taken to calling him "Comrade Hank" and a communist.

But behind all this Cold War era rhetoric lies a certain amount of truth. If Congress gets its way and the US government takes a Golden Share as collateral from all those firms who want to offload toxic mortgage-backed derivatives into Treasury coffers, it will mark the biggest financial services nationalisation programme in history.

Plus, if the US Treasury gets involved in limiting boardroom pay, just watch the bright young MBAs depart for Dubai.

These seemingly extreme measures are not Paulson's own preferred ideas, though. They are provisions he is willing to accept to get his $700 billion rescue package through Congress in a hurry.

They are bi-products of his hastiness to press on with his plan coupled with a seeming disregard for the consequences of his actions.

Paulson means well, but each of his good points is overshadowed by a bad point. In the same way Lehman Brothers had its "good-bank bad-bank" elements the US Treasury seems to be have "good-Hank bad-Hank" for a boss.

It is very good, for example that he knows Wall Street well. He knows how bankers think and, more importantly, he knows their businesses inside out, making it harder for them to lie to him.

But it is also bad that Paulson is so close to the big financial industry players, especially to Goldman, as it makes the bailout he is offering look like a get out of jail free card for his old chums.

It is also a good thing that Paulson acted so quickly to decide the fate of Bear Stearns, Lehman Brothers, AIG, Fannie Mae and Freddie Mac.

Had he delayed we might have faced even greater market turmoil. But his swiftness to call time on some institutions while extending a helping hand to others has led to charges of inconsistency and unfairness.

If Lehman had known about the current bailout plan, for example, it would not have needed to file for bankruptcy.

Paulson advocates like to gush about his flexibility. He is able to bend the rules and write new ones to accommodate each particular problem facing banks, insurance companies or odd companies like Fannie Mae and Freddie Mac.

But his flexibility creates further uncertainty, which markets abhor above all else. Look at the new rules governing short-selling. The practice – which to most in the market was an entirely necessary and legal way to make a living – has been temporarily outlawed.

First, though, it was cut back, then it was reinstated, now it has been banned entirely for the time being. That sort of flexibility looks like indecisiveness and pandering to some.

It is a good thing Paulson was in place in the dying days of this Bush administration as no other official from the President down to SEC chairman Chris Cox and Fed chairman Ben Bernanke seemed capable of doing or saying anything to calm the markets and steer the US economy onto a more stable course.

It was fantastic, in fact, that someone who had earned the trust of both Democrats and Republicans in Congress with such able politicking was on hand to solve this immense problem.

But it is a bad thing that in their desperation for a solution and a figurehead in a time of crisis that Congress was so quick to say yes to whatever Paulson put on the table, even when it should have been obvious that his approach might not be the best. They simply did not know what else to do.

Instead of giving carte blanche to good-Hank, someone should have asked bad-Hank why, after he stepped in to rescue Bear Stearns, Fannie Mae and Freddie Mac needed saving, and after that why AIG needed a helping hand.

Fortunately Paulson's omnipotence is now being questioned by politicians and Wall Street executives, who are increasingly sceptical that his proposed enormous state handout will achieve anything other than further chaos while dealing a crippling blow to America's economic standing in the world.

Unfortunately, though, there seems at present to be no viable alternative to his plans so America is stuck with good-Hank bad-Hank.

Let us hope the results of his schizophrenic policymaking do not prove entirely self-destructive.