Freddie Mac and Fannie Mae are the platypuses of the financial world. As shareholder-owned companies which rely on state guarantees, the two government-sponsored enterprises are neither public fish nor private fowl. They are also evolutionary relics from another time. The US Treasury looks increasingly likely to bail out the two mortgage giants. But before it does so, Hank Paulson, the Treasury secretary, must think about an intelligent design for what he would like the GSEs to evolve into.

Fannie and Freddie are vast institutions, guaranteeing $5,300bn of US mortgages, of which 15 per cent are from riskier categories of lender. The credit squeeze and the housing slump mean borrowers are defaulting and Fannie and Freddie have run up significant losses.