The subprime crisis has deepened in the past 10 months. It reached such a desperate stage that the Federal Reserve felt obliged to rescue Bear Stearns, break convention by lending directly to primary dealers, including all the big investment banks, and widen the range of collateral it accepted.

Many policymakers and academics have noted that the US is suffering from problems that are similar to those that paralysed the Japanese financial system in the 1990s. Indeed, parallels abound. Both economies experienced an asset bubble, which subsequently burst. Financial institutions failed to recognise the true extent of their contingent liabilities, both on and off their balance sheets. Credit ratings were at best misleading. The list goes on.