The worst is yet to come for Hank Paulson, the US Treasury Secretary.

While Mr Paulson has been working around the clock, every weekend, for five weeks to guarantee more than $1 trillion worth of American mortgages, manage the collapse of two banks, the distressed sale of two others and to secure the $850 billion bailout package, his work has barely begun.

Mr Paulson has just over a month to construct one of the biggest asset management funds in the world, a fund that will act as a financial landfill for the billions of dollars worth of toxic investments currently stagnating on the balance sheets of the world’s largest banks.

The fund – which after its three federal instalments will hold $700 billion worth of taxpayer money – is to buy up distressed mortgage-backed debt and help the banks to purge their books and, it is hoped, start lending to one another again. At the moment, the fund has no formal official to oversee it, no fund manager to run it and has no idea how it will value the assets it is about to buy.

The former chairman of Goldman Sachs has appointed a team of advisers from the bank he used to run, and has informally invited three asset managers – Black Rock, Legg Mason and the Pacific Investment Management Company – to bid for the mandate.

As the markets have seen since the end of the summer, a month is along time to wait in a financial crisis. In the past four weeks Washington Mutual, one of America’s biggest mortgage banks, and Lehman Brothers have gone bust. Merrill Lynch and Wachovia were both forced into distressed sales. Under the current timetable, Mr Paulson’s fund will not even buy its first toxic bond until well after election day on November 4.

In the meantime, who else will go bust? What other market, of which few have heard, will need bailing out? Even after the bailout announcement, there was renewed speculation that National City, one of the biggest mortgage lenders in Ohio [a key swing state], may be next. Fifteen banks in America have gone bust since the beginning of the year, rapidly depleting the federal insurance fund, which has just $45 billion assets but insures more than $1 trillion worth of deposits.

It is likely that Washington will change the rules on accounting practices known as mark to market valuations, where a bank must value its assets according to the price it could get in the market, that day. But in markets, which are at best panicky, and at worst, frozen, who knows what an asset is really worth?

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