Alf Young on Thursday:Anyone who thinks that, at exceptional times like these, all market participants set aside self-interest to ensure the earliest return to general order and stability must still believe in the tooth fairy too.

The Financial Services Authority says it "will not tolerate" the kind of market abuse which, it clearly suspects, lay behind yesterday's continued battering of the HBOS share price. However, judging by the FSA's track record on such matters, it is not at all clear that its warning amounts to much more than regulatory bluster.

In the current turmoil gripping global financial markets, rumours - however unfounded - about who might turn out to be the next casualty, are inevitable. And anyone who thinks that, at exceptional times like these, all market participants set aside self-interest to ensure the earliest return to general order and stability must still believe in the tooth fairy too.

Finding out who made money yesterday from HBOS's latest share price slide and partial recovery is one thing. Proving they were shorting the stock before spreading false rumours about the state of the bank's balance sheet is, sadly, quite another.

Stock markets have always harboured their share of unscrupulous opportunists. And today's deregulated trading environment has made some of that behaviour almost respectable.

If you doubt that, read what John Kay and Martin Wolf have been saying recently in the Financial Times about how those who run private equity and hedge funds make huge personal returns almost regardless of their own investment performance or how their investors fare in the end.

And if Wolf is correct that the hedge fund model may now, like securitised sub-prime mortgage lending, be headed for the financial scrap heap, there will be more players, in the weeks and months ahead, only too happy to exploit continuing market turbulence to their own greedy ends.

So, apart from publicly slapping down the most egregious rumours, it's not clear what else the financial authorities will ever achieve by trying to hunt down these "fantasy" mongers. Better then to focus on what the authorities can - and are - doing to restore some semblance of calm to the financial marketplace. And their chances of success.

The lion's share of action is taking place where the problem started and where the economic outlook now appears most grim - on the other side of the Atlantic.

Last September, Mervyn King, Governor of the Bank of England, told MPs on the Treasury Select Committee: "You cannot transfer the ownership of a bank over a weekend because of the Takeover Code".

But last weekend that's exactly what his opposite number Ben Bernanke, at the US Federal Reserve, did. He won mighty plaudits for putting Bear Stearns, at a knock-down price, into the hands of JP Morgan Chase. And Bernanke and his Fed colleagues didn't stop there.

They had already, since last autumn, pumped hundreds of billions of dollars of fresh liquidity in to the US banking system and slashed American interest rates all the way down from 5.25% to 3%. Now, on top of sweetening the acquisition of Bear Stearns with another $30bn of American taxpayers' money, the Fed has opened, for at least six months, a new lending facility, available to all primary dealers, where they can draw down cash against almost any form of investment-grade security on their books.

On top of that, on Tuesday it carved another 0.75% off interest rates, taking them to 2.25%. And yesterday the US government eased capital requirements on Fannie Mae and Freddie Mac, the two big state-sponsored mortgage agencies, releasing another $200bn to help struggling homeowners refinance into more affordable home loans. Then there are the the promised Bush tax rebate cheques to come. Government, in its various guises, in the home of free market capitalism, seems to be rewarding moral hazard, not punishing it, and putting the battle against inflation on the back burner. Bernanke hasn't quite lived up yet to his reputation as Helicopter Ben, willing to fight deflation, in extremis, by showering countless dollar bills on the American populace from on high.

But he has certainly shown himself willing, since this crisis broke, to orchestrate the cascade of public money being poured into stabilising the American financial system. His opposite number in London, Mervyn King, has adopted an altogether more cautious line.

Here, the liquidity the Bank of England has injected has been much more restrained. The latest £5bn was nearly five times oversubscribed earlier this week. And as the latest Monetary Policy Committee minutes published yesterday show, for most of the nine members, the fight to get inflation back on track is still the dominant priority of monetary policy.

Even if there is another quarter-point cut next month, UK rates will still stand at 5%, a whisker under where US rates were last September and more than twice what they are now. Yet, in currency terms, sterling has enjoyed little comparative advantage from that widening interest rate gap as the dollar has continued to slide against other currencies.

The pound's resulting weakness against the euro will not please anyone planning to holiday on the continent this summer. It will, however, boost those exporters across the UK, who sell a lot into the eurozone. Which strategy, that of the Federal hare or the Bank tortoise, does most to calm the current crisis we will not know until the firestorm has burnt itself out.