The credit squeeze is turning from a firm embrace into an uncomfortable bear hug. News on both sides of the Atlantic suggests that lenders will need to raise new capital and, even then, will have to take on less new business. Tighter conditions look set to continue and there is little that anyone can do to ease them.

On Tuesday, Freddie Mac, a repackager of home mortgages sponsored by the US government, announced a $2bn third-quarter loss, and Paragon, a UK mortgage company, announced that it was struggling to renew its financing facilities. Interbank lending rates have crept up again in recent weeks.