The US Government is to spend up to $250 billion buying direct stakes in banks and other financial institutions under a controversial emergency plan which President Bush insisted today was “not intended to take over the free market but to preserve it”.

In a rescue scheme modelled on that announced for British banks by Gordon Brown last week, the partial nationalisation of companies such as Wells Fargo or JP Morgan Chase will be accompanied by a package to unblock the credit logjam paralying the system.

It is a painful move in a country that prides itself on being the home of market capitalism - as Mr Bush’s Treasury Secretary, the former Wall Street CEO Hank Paulson, was the first to admit.

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