US shares tumbled yesterday as investors gave an initial thumbs down to plans by the Obama administration to deploy up to $2,000bn (£1,380bn) to clean up toxic assets in the financial system and restart credit markets.

Tim Geithner, Treasury secretary, said that the authorities would also subject the nation’s biggest banks to a stress test and provide additional capital if required.

Geithner emphasised that the plan aimed to 'leverage and mobilise private capital' – with government funds used only as a last resort.

But the stress test and toxic asset clean-up could reveal large capital needs that only the government can meet. If this happens, the plan could open the door to at least a temporary increase in government control of the financial sector.

Financial Times, Daily Telegraph