They are known officially as government-sponsored enterprises or GSEs.

They are known officially as government-sponsored enterprises or GSEs. But after a weekend of feverish activity in Washington, we now know that the twin juggernauts of US housing finance, Fannie Mae and Freddie Mac, will, in effect, be nationalised, if that's what it takes to keep them in business.

Who would have thought that George W Bush would be contemplating a bit of state control in the concluding months of his term in the White House.

But no American president, whatever his political instincts, can allow these strange financial beasts to fail.

They are GSEs. Fannie was a product of the Great Depression and the New Deal. Freddie was added in 1970. But since that time, while still technically sponsored by government, they have been mainstream shareholder-owned businesses, looking to make a profit, their own shares freely traded on Wall Street.

That stock crashed to new lows last week, as traders contemplated the impact of mounting levels of default by American mortgage holders on Fannie and Freddie's already stretched balance sheets. There was a growing risk one or other would go under.

Between them they hold or guarantee an eye-watering $5.3 trillion of outstanding US housing debt, around half of everything American homeowners still owe on their mortgages. This is mainstream housing finance, not the sub-prime dross which has proved so toxic to the global financial system since America's housing bubble burst.

Indeed, after a series of accounting scandals earlier this decade, Fannie and Freddie, missed out on much of the subsequent housing boom. Regulators required them to beef up their capital reserves. And their legal requirement to offer only mainstream mortgages to borrowers with a deposit and documented income kept them clear of the sub-prime mire.

But the subsequent housing bust across the Atlantic has spread well beyond sub-prime. Repossessions have mounted right across the housing market. Negative equity is now commonplace. And as a result, between them, Fannie and Freddie have run up debts of $1740bn.

Financial failure, which seemed to be looming last week, is not just unthinkable because of the consequences for an already battered US housing sector. Freddie and Fannie don't just provide mortgages themselves. They have historically bought up mainstream mortgages provided by other American lenders, as a way of injecting further liquidity into the whole system.

Many of these mortgages have been parcelled up and sold on as securities in the global marketplace, to raise new funds for Fannie and Freddie's operations. These securities are held by governments, pension and mutual funds, big corporations and large institutional investors all around the world.

Were either Fannie or Freddie to fail, the fall-out on the global financial system would have been unimaginable. A trigger for such meltdown was looming.

Yesterday, Freddie Mac was planning a $3bn auction of three and six-month securities. Had that auction bombed, the floodgates might have opened.

So the authorities - led by the US Treasury Department and the Federal Reserve - spent the weekend devising a series of measures which would prevent Armageddon. US Treasury Secretary Henry Paulson announced the terms of the package late on Sunday.

His department is offering new lines of credit to Fannie and Freddie and is prepared to buy up some of their equity, if needed. The Fed, which yesterday announced its plans for a new regulatory framework to crackdown on dubious mortgage lending, has authorised the Federal Reserve Bank of New York to make further lines of credit available to the two GSEs and is, itself, to be involved in strengthening the regulatory framework under which they operate.

Paulson says the objective is to allow the pair to continue to play their central role in America's housing finance system "in their current form as shareholder-owned companies". However, this package makes implicit government guarantees explicit. And that Treasury Department power to buy shares in Fannie or Freddie suggests that, in extremis, full state control is an option.

The rescue package has achieved its first objective. The Freddie Mac auction yesterday went well and attracted more bidders than at any time since January. In terms of wider market sentiment, initial results are more mixed. That said, a surprise development in the financial system here in the UK, suggests some players are beginning to identity new opportunities amidst all the carnage.

Santander's agreed £1.25bn offer to buy mortgage bank Alliance & Leicester means the Spanish owner of Abbey still sees a profitable future in providing housing finance in the UK.

Even at 299p a share, if this deal goes through Santander is getting Alliance & Leicester on the cheap. But it means the next, necessary stage in this whole sorry saga - consolidation and the weeding out of the weakest players - is already getting underway.

Doubtless there will be more scares and alarms before the worst is behind us. But apocalypse has, at the very least, been postponed.