On Sunday, the US Treasury secretary Henry Paulson offered a package of unprecedented financial support for the tottering mortgage groups Fannie Mae and Freddie Mac, which quietly included an equally unprecedented extension of the Federal Reserve’s supervisory authority over them. It followed an agreement between the Fed and the Securities Exchange Commission on July 7 that implicitly raised extending Fed scrutiny over investment banks in the wake of Bear Stearns. This, in turn, came after a suggestion by the New York Fed president Timothy Geithner in June to enhance the Fed’s overall regulatory role and a proposal by Mr Paulson in March to promote the Fed to a central financial scrutiny role.

This is the latest chapter in a 200-year-old US struggle between private finance and the elected officials bent on controlling it. What is being proposed is that the clock be turned back to invest a 20th-century central bank with authority over 21st-century financial institutions. History shows that attempts to alter the Fed’s role attract strong political resistance and considerable policy consequences.