Fears about the financial system grew on Monday as money market liquidity tightened and sharp falls in the share prices of mortgage financiers Fannie Mae and Freddie Mac led the US stock market lower.

Fannie’s and Freddie’s shares lost 22 per cent and 25 per cent, respectively, after an article in Barron’s suggested that the US government was considering recapitalising the companies on terms that would all but wipe out existing shareholders.