With problems in the American sub-prime mortgage market already blamed for many of the UK's economic woes, economists and politicians here will be watching anxiously to see what impact the latest crisis has on this side of the Atlantic.

The nationalisation of US mortgage giants Fannie Mae and Freddie Mac dwarfs that of Northern Rock in Britain and represents the largest bail-out in US history.

Shares in both firms have crashed by 90% in the past year as falling house prices and home loan defaults caused massive losses.

As to whether yesterday's emergency measure will do anything to stem the stock market slide and the economic slowdown, a market bounce is possible. But one US analyst said yesterday the move was at best "baby steps" in moving forward, with the housing slump expected to last into 2010 - inhibiting economic recovery in the UK and around the world.

The immediate risk is that the jump in US government debt will put downward pressure on the dollar - and upward pressure on oil prices.

Fannie Mae and Freddie Mac are mortgage market players on a massive scale, guaranteeing the equivalent of £2800bn of mortgage debt - about half the nation's total.

By contrast, Northern Rock ran up £25bn of liabilities while the Bank of England's Special Liquidity Scheme launched in April has so far underwritten £50bn of mortgage debt.

Fannie and Freddie buy mortgages from banks and repackage them into bonds that they sell - and guarantee - to investing institutions. This also enables capital to be ploughed back into the mortgage financing market.

Last Friday, the Mortgage Bankers Association said that more than four million American homeowners with a mortgage, a record 9%, were either behind on their payments or in foreclosure at the end of June.

Although the firms claimed they had adequate capital, they were in the dock for failing to heed warnings that the most dramatic housing bubble in US history would burst, and were vulnerable to further house price falls. A law passed in July gives the US Government the ability to effectively nationalise the firms and inject new loans or capital.

Fannie and Freddie were owned by shareholders, and were created to help promote low-cost mortgages and the US home ownership dream. The bail-out effectively represents a huge injection of new money into the US housing market in an attempt to refloat the economy.

According to Whitehall sources, the political pressure for more government intervention has prompted tension between numbers 10 and 11 Downing Street, with the Prime Minister keen on radical action but the Chancellor strongly opposed.

The Crosby report, which was commissioned by the Treasury to consider the issue, has yet to be unveiled. In his interim report Sir James Crosby, the former chief executive of HBoS, touched on extending the Special Liquidity Scheme which allows banks to swap dodgy securities for government gilts - and also on the idea of covering mortgage lending with permanent government guarantees.

But Governor of the Bank of England, Mervyn King, has already voiced his strong opposition to anything resembling a government bail-out of mortgage lenders. He said last month: "It would be very dangerous to move to a situation where the government saw a major role in guaranteeing lending. Why should the taxpayer take on the risk of borrowing by individual borrowers, some of whom are risky?"