US Treasury Secretary Henry Paulson is touting his audacious masterplan � designed to spend at least $700bn of American taxpayers� money buying up all the toxic paper currently clogging global financial markets.

Over there they are calling it "cash for trash". US Treasury Secretary Henry Paulson is touting his audacious masterplan - designed to spend at least $700bn of American taxpayers' money buying up all the toxic paper currently clogging global financial markets - as the least-worst option facing Washington's legislators.

"I hate the fact that we have to do it, but it's better than the alternative," he kept saying on Sunday, as he toured the television chat shows, pressing the urgency of his case, lest financial Armageddon break over all our heads.

The Bush administration is urging Congress to pass the proposals before this week is out.

There is, however, a groundswell of resistance to Paulson's new-found haste. Some Congressional Democrats are anxious about the sweeping personal powers the Treasury Secretary is seeking to decide which dodgy assets will qualify for a federal bail-out and his insistence on immunity from review from courts or other administrative agencies.

They want more done to help homeowners struggling to pay their mortgages and new curbs on the pay of top executives of banks and other financial institutions now trying to dump their trash in the public dustbin.

Commentators are pointing out that, before he came up with this extraordinary rescue plan, the US Treasury Secretary kept suggesting the crisis had already been contained and then proceeded to play God over which institutions should be saved or not. Wasn't that adding to the market fragility which, Paulson now argues, is the primary reason for the swift, clean-up action he advocates now?

Critics also worry that, as a former Goldman Sachs top dog, Paulson is favouring the world from which he came over the people who pay his salary now. If he has his way, and the Bush administration spends whatever it takes to get money markets moving freely again, moral hazard in banking and financial markets will be circumvented yet again. The thundering rise in global stock markets on Friday, when first word of the plan got out, spoke volumes for that.

The trash will sit, perhaps for years, at taxpayers' expense, until someone works out what it is worth and whether there is some market appetite to acquire the bits of any value.

What that extended process produces, how much of the $700bn Paulson plans to spend ever makes it way back into the public coffers, is anyone's guess. It will almost certainly be a lot less than $700bn.

However, Paulson is not, single-handedly, pushing this deal through. Earlier last week one of his predecessors, Nicholas Brady, together with legendary Federal Reserve chairman Paul Volcker, and former US comptroller of the currency, Eugene Ludwig, took to the pages of the Wall Street Journal to make the same case - in apocalyptic terms. "We are in the midst of the worst financial turmoil since the Great Depression," they wrote. "Absent bold action, matters could well get worse."

They argued for a new mechanism along the lines of the Resolution Trust Corporation of the late 1980s and the Home Owners Loan Corporation of the 1930s. And they warned that "until (it is) in place to remove this decaying tissue from the system, the infection will spread, confidence will deteriorate further, and we will have to live through the mother of all credit contractions."

They acknowledged the financial system that gave rise to this canker "needs basic long-term reform". But the more pressing task, they all insist, is to wield the taxpayer's scalpel on the decay. The trash - all those complex, leveraged financial instruments dreamt up by financial whizz-kids in the bubble years, but now untradeable at almost any price - will be bought up by Paulson's quarantine vehicle, by a reverse auction process.

Banks and other institutions which bid the least to get the trash off their books will see it bought up first. And so on until all the billions are spent. Thanks to current accounting standards, banks have already had to mark many of these dubious assets down to market value, as little as 20% of what they thought they were worth this time last year.

The Paulson clean-up, if it gets Congressional approval, will depend on what view holders take of the comparative risks of getting shot of it now or holding on in the hope that some higher value might re-emerge later. The man himself says he will be pressing his colleagues around the world to come up with similar programmes to help their banks.

Here, the Brown government seems in no hurry to follow Paulson's example. Even if it had any appetite for an equivalent bad bank here, there's the little problem of Bank of England resistance. As well as monetary policy, our central bank is also still responsible for financial stability.

But its Governor, Mervyn King, has no appetite for rewarding moral hazard. Any cash for trash initiative over here might make his position untenable. And that would trigger fresh turbulence and market uncertainty at the very moment Gordon Brown is trying to claw his way back to some semblance of political control.

Paulson, as far as the UK is concerned, is almost certainly on his own.