by R Peston, BBC’s Business editor

http://www.bbc.co.uk/blogs/thereporters/robertpeston/

After a brief period of calm in the summer, new disturbing evidence has been disclosed today of the weakened condition of financial institutions, both big ones and smaller ones.

The US Government is in effect nationalising North America's two biggest providers of finance for the housing market, Fannie Mae and Freddie Mac.

Their regulator, the Federal Housing Finance Agency, is taking direct control of them under a system known as "conservatorship".

This is an event of profound significance for the global economy, since these two eccentric institutions own or guarantee almost £3000bn of US mortgages.

Banks, including some of the world's most important central banks, have direct and substantial financial exposure to both Fannie and Freddie.

So, given the febrile state of markets across the world, it has become dangerous for doubts to persist about whether these two are viable and would be able to keep up the payments on their massive liabilities.

What's brought Fannie and Freddie to this humiliating impasse?

Well there's the continued decline in the US housing market, the sorriest housing market on the globe (for all the falls in UK house prices).

And then there's the discovery by Morgan Stanley, the investment bank advising the US government, that Freddie's capital resources are smaller than meets the eye.

For the US Treasury, the bailout could turn out to be one of the most expensive financial rescues in history, running to tens of billions of dollars.

Bad news, except perhaps for our own Chancellor of the Exchequer, Alistair Darling - since the Fannie and Freddie rescue costs may well make the potential losses for the taxpayer from Northern Rock seem almost modest (well almost)…..