The US on Tuesday began to face the financial consequences of the bail-out of Fannie Mae and Freddie Mac after Congress’s budget watchdog said the housing giants’ operations should sit on the government’s books and the cost of insuring against a US default crept higher.

With the stock market tumbling, the non-partisan Congressional Budget Office said the government takeover of Fannie and Freddie meant the companies should no longer be regarded as outside the public sector.