The credit crisis entered a new phase at the weekend when Hank Paulson, the US Treasury Secretary, announced moves to secure the funding position of Fannie Mae and Freddie Mac and to make it possible for the Treasury to buy equity in either or both.

His announcement showed that US credit markets still have serious problems, in spite of hopes a few months ago that things were improving. Liquidity evaporated as buyers deserted the exotic markets that flourished in the low interest rate, high liquidity era that followed the last recession. Prices of complex structured finance debt that was both highly rated and highly levered collapsed, creating huge losses and bringing rating agencies into disrepute.