Hank Paulson, the US Treasury Secretary, memorably fell to his knees last week to beg Nancy Pelosi, the Speaker of the House of Representatives, to find a way to get his $700 billion bailout plan through Congress.

At the weekend the two leaders presented a slightly more orthodox tableau of cooperation. Beaming in front of reporters in the US Capitol early yesterday, they announced a deal – essentially, in its key elements, not much changed from the one Mr Paulson pleaded for last week.

The final version, which Congress seems likely to approve today, still has plenty of critics. Almost everyone agrees that providing taxpayers’ cash for the banking system is the only way to resolve the financial crisis. But the plan’s opponents voice several objections to this version.

They say that, despite the small improvements inserted by Congress, it is still fundamentally unfair: it makes the taxpayer cover losses caused by the errors of bankers while bank shareholders will still get the lion’s share of their money back, with possible gains. Better by far, they say, would have been to have the Government buy stakes in banks directly. That would not only instantly have given the banking system the capital it needs, but would also share some of the ultimate profits banks make between taxpayers and shareholders. But there is a much more pressing issue raised by some critics. Will this plan even achieve its own objectives? At the root of the Government’s proposal is the calculation that banks are in effect overestimating the scale of the bad assets on their books. Mr Paulson believes that the basic problem is one of liquidity – a short-term lack of confidence in the whole banking sector. Because markets are so jammed now, banks cannot sell their assets and so are forced to value their toxic securities at fire-sale prices.

The Paulson plan, then, works by providing a guaranteed buyer for these assets at a higher price than that at which they are currently valued. The banks pocket the extra money they get by selling to the Government, helping to repair their capital base, and the Government eventually recoups most of the outlay by selling again when the market is normalised. As the market returns to normal, the banks’ other assets also rise in value, further helping their capital.

It is like trying to sell a house in an emergency. If you had to sell your home tomorrow you might not get much for it. But, if you could wait until the market is moving again, you could get a better price.

But what if the problem is not that banks are being forced to value their assets at too low a price, but that they are sitting on massive losses that reflect a collapse in the value of their securities?

If that is the case, then the Treasury’s bailout may not be enough. Some reliable estimates suggest that the losses in the US financial system – at core, reflecting the scale of the downturn in the housing market – may be more than $1 trillion. If the Treasury is buying those bad assets at a little above their current value, it will not be providing anywhere near enough capital for banks, who will still be sitting on massive losses.

If that is the case, Mr Paulson might soon have to go back down on his knees and plead this time with an even higher authority for intervention. The Almighty.

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