Congress rescues Freddie Mac

The US Congress has backed the biggest state rescue of the American financial system since Franklin Roosevelt's 1933 New Deal, signifying substantial relief for world markets. The US Treasury now has the go-ahead to pump capital into Freddie Mac and Fannie Mae, the mortgage lenders which hold half the country's home loans and are the world's two biggest financial institutions. The top level for national debt has been raised to $800bn, giving the Treasuryhuge scope to support the two beleagured institutions.

The bill also empowers the Federal Housing Authority (FHA) to guarantee up to $300bn of new mortgages for home owners ensnared by "honeytrap" contracts - it is hoped the scheme will avoid fresh defaults. The collapse of the US sub-prime mortgage market triggered the global financial crisis in the first place.

Some critics feel the measures are too generous, and are protecting Wall Street from the results of its own cupidity. Republican congressman Jeff Flake said: "This bill has moral hazard written all over it: we are letting a monster loose."