Hank Paulson, the US Treasury secretary, compared his powers over Freddie Mac and Fannie Mae to a bazooka. His new plan to buy up mortgage-backed securities is nothing short of a B-52 bomber. He will need to make some modifications to it before it flies, but Mr Paulson should also seek an even bigger weapon – a plan for the public recapitalisation of US banks.

As the value of mortgage-backed securities has fallen, some institutions find themselves with too little capital to support lending. Some are also unable to raise the money they need to finance the securities. By selling assets, to raise money, they have depressed prices further. This has weakened balance sheets, forcing them to dump yet more.