There are only a few weeks left for Congress and the Bush administration to agree on large-scale government intervention in the mortgage market, according to Chris Dodd, one of the most senior lawmakers overseeing US economic policy. Financial Times

Dodd said that a compromise deal needed to be reached before home prices collapsed further and election-year politics took over. 'I am optimistic at this point, but this has to happen fairly quickly if it is going to be meaningful.'

Dodd, the Connecticut Democrat who chairs the Senate banking committee, last month made an aggressive proposal to use public funds to guarantee the refinancing of up to $400bn (€250bn, £200bn) in mortgages at lower values through the Federal Housing Administration, the government-owned mortgage insurer.

The plan is designed to tackle the problem of negative equity – or homeowners holding mortgages worth more than the value of their homes – which has been a key feature of the US housing crisis.