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The US "Secretary of Treasure" - Hank "King Henry" Paulson - and Federal Reserve Chairman Ben Bernanke, with their dour lost-shepherd looks, have been making their rounds on Capitol Hill, lobbying Congress to approve the US$700-billion rescue package to buy the toxic financial waste from the American financial system. Listening to them, you get the ultimate sense of urgency that Paulson's troubled asset-relief programme (TARP) is needed to avert the impending American financial Armageddon. Bernanke said global financial markets "remain under extraordinary stress", meaning, with a problem of this magnitude in the world's greatest economy, nobody will be left unscathed. President Bush put it plainly as he always does: "It is a big package because it is a big problem."

It wasn't long ago that this president sent his deputies to every national and international forum to enlighten them about the fact that Saddam Hussein possessed weapons of mass destruction (WMD) and that he was the force behind the mother-lode of terrorist activities around the world. The US administration even threw in a "free the Iraqis" element that together with the other two factors justified the US invasion to take Saddam out.

At that time, the fear factor worked. The scared US Congress gave the president a blank cheque to stage the most spectacular security and military blunder in recent history. It included some of the worst civil and human rights abuses, such as expansive wire-tapping and no-time-limit incarceration without charges or trial - a practice that goes against the pronounced core of American values and principles.

Not long after the March 2003 invasion, the American people, to their horror, learned that there were no WMD and that Iraq had nothing to do with the 9/11 attacks. And it is still not clear if the Iraqis are better off today than they were under Saddam.

With this track record, it is understandable why people are apprehensive about the remedies proposed by the Bush administration despite the fact that they all agree that this time a new kind of WMD is present.

Experts concur that the US financial crisis is the worst since the Great Depression. They agree that the problem has reached such perilous proportions that a significant and effective intervention is required. They agree about the clear and present danger that this financial black hole has on global economies. They have serious doubts, however, how to go about the intervention and whether or not Paulson's TARP is fundamentally sufficient to deal with the problem.

American taxpayers are becoming more and more furious that they will have to foot the bill for the Wall Street mess they did not create. En masse, they are making their angry voices heard through their representatives on Capitol Hill.

The once seemingly invincible cavalry of Paulson does not command quite the same confidence as before. This is the man who, for almost two years before the calamity hit, painted a rosy picture of the US economy and repeatedly declared that the financial crisis was "contained". Now, all he is muttering is the lame "Trust me".

The Resolution Trust Corporation (RTC) was set up by the US government to deal with the savings and loan crisis of the 1980s. It took over the troubled thrifts, seized their assets and liquidated them. It devised unique "equity partnerships" with the private sector in executing the rescue programmes which were reflective of the government's - and, ergo, the taxpayers' - retained interest.

On the contrary, Paulson's TARP proposed a blank cheque not to buy into the equity of troubled companies, but to buy their bad assets that nobody in the world knows the value of, or if they are worth anything at all. He asked for unlimited indemnity for himself and those executing the plan from any kind of future prosecution. Nobody knows how his plan would function. With all the outstanding CDO/CDS, interest-rate swaps and cocktails of derivatives, nobody can tell how big the American financial hole is, and if the $700 billion could become trillions.

Given the benefit of every doubt and assuming the best of all possible worlds, Paulson's TARP provides only for a necessary condition to deal with the current complex and dangerous financial problems. It is by no means sufficient.

The US economy is one that the house built, and it has proven to be a house of cards. It is an economy that has been extremely over-leveraged for a prolonged period of time. With the burst of the housing-market bubble, the scarcity of capital and credit becomes real and extremely serious. With America's low (or rather zero) national savings rate, huge trade deficits and capital depreciation allowance, Americans will have difficulties convincing foreign capital to rush in for the rescue.

Then there is what Paul Krugman calls the "paradox of de-leveraging", which casts more doubt on Paulson's plan.

As financial institutions have to pay down their debts, selling assets at the mark-to-market prices will drive down their asset value, which will further weaken their already bad financial position. The government, in the role of rescuer, is in a conundrum of its own. If it is to buy the assets high to prop up the troubled financial institutions from collapsing, taxpayers will suffer. If it buys low, the crippled financial institutions will be left with inadequate equity. When it comes down to pricing, all hell is likely to break loose.

What it boils down to is that an injection of new capital is needed for the US to get out of the de-leveraging paradox and for its financial woes to be fixed,. And there will not be enough American capital to go around. If finance is the brain of the economy, will the fudged rescue package that is likely to come out of the US Congress be effective in fixing this brain disease? Who will dare and be willing to become the lender of last resort for America?

The three months after the US election, and before the new administration comes on board, will be a vacuum in the effort to address the momentous problems of the financial WMD and the carnage it could leave in its trail.

What a scary purview.