The latest crisis to grip the US economy has left investors fearful that there is little the White House and the Federal Reserve can do to restore stability.

Problems at Freddie Mac and Fannie Mae are just the latest to spook Wall Street and beyond and have piled further pressure on Treasury Secretary Hank Paulson and Fed chairman Ben Bernanke.

There have been repeated interventions since the onset of the credit crunch and although the Fed still has plenty more money to lend to banks and other institutions, there are doubts over how much it can do.

Ethan Harris, chief US economist at Lehman Brothers, said: "I don't think the Fed can shake its magic wand and right everything in the capital markets. They are trying to buy time for the economy to lick its wounds and recover."

The Fed took dramatic action last autumn and winter to bolster the economy with interest rate cuts - from 5.25% to 2% - and billions of dollars of aid to the banking system.

However, despite the big rate cuts and emergency funding the market and the economy remain in trouble. There is little room left to cut rates, particularly with inflation on the rise, and there is a growing feeling the US may now have to tough it out.

The combination of falling house prices, ebbing confidence among consumers, and the rising oil price has plunged the US economy into crisis and many observers warn the stock market has further to fall.

Bruce McCain, chief investment strategist at Key Private Bank, said: "A big part of what the Fed is able to do for the economy they have already done."