The rescue of Fannie Mae and Freddie Mac announced by Henry Paulson, US Treasury secretary, on Monday was the inevitable consequence of the “marketisation” of banking that has transformed central banks from lenders of last resort to buyers of last resort. These government-sponsored agencies own or guarantee $5,000bn of mortgages, equal to half of US government debt. Unless regulators change track, there will be more rescues to come.

Fannie Mae and Freddie Mac have become the symbols of the switch from bank finance to market finance. They did not originate loans but owned or guaranteed securitised loans originated by others. When a report into accounting improprieties in 2003 led Freddie Mac to scale back its activities, banks, then looking for a new source of income after the dotcom bubble, tried to replicate the model and push the envelope. The main cheerleaders for the marketisation of banking were the gnomes of Basel – the centre of international bank regulation.