The possible bailout of two giant US mortgage lenders has added to fears markets are facing a lengthening credit crunch, it has been reported
The US government could be forced to nationalise Freddie Mac and Fannie Mae, firms that provide more than 50 per cent of all its mortgages.
Their share prices dropped again on Monday by 25 per cent and 22 per cent respectively.
US sub-prime borrowing defaults started the current credit crunch, the repercussions of which have been felt in commercial property markets across the globe.
Confidence in the UK and Europe is also at a low – yesterday the FTSE 100 dropped almost 2.5 per cent, German markets fell by almost as much and Japanese stocks fell further, ending three per cent down.
Former International Monetary Fund chief economist Ken Rogoff has added to negative sentiment.
“I think the financial crisis is at the halfway point, perhaps,” he said.