A year ago, even the most diehard of pessimists could never have foreseen just how fast and how furiously the US housing market would unravel, or the extent to which the fallout from the property crash would ricochet through the American economy and across the Atlantic.

The housing market quickly deteriorated into the worst property crisis since the Great Depression and the fallout encompassed events that would have seemed inconceivable just a few months earlier.

As the crisis gathered momentum, two Bear Stearns hedge funds melted down under the weight of investments in high-risk sub-prime mortgages last summer. This was followed a few weeks later by the departure of the chief executives of Citigroup and Merrill Lynch within days of each other, after each group recorded billions of dollars of mortgage-related investment losses.

But these developments turned out only to be the tip of the iceberg in a credit crisis that has seen the banking system run up about $400 billion (£205.25 billion) worth of writedowns and which is still unfolding.

Crunch calendar: where it all went wrong

Timeline of the key dates, from the first fears over sub-prime lending last spring to the latest banking losses

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Citigroup has taken a hit of nearly $60 billion from the credit crunch in the past nine months, while Merrill has recorded about $52 billion in writedowns in the past year.

In some ways, however, the US Government’s actions are even more dramatic than either the telephone number writedowns that Wall Street has taken or the departures of some of its biggest titans.

In March, the Government took the dramatic step of brokering the sale of Bear Stearns to JPMorgan Chase as a run on Bear Stearns pushed it to the brink of collapse. In a move which demonstrated how scared the Government was of the credit crunch, it effectively underwrote $30 billion of Bear’s most toxic sub-prime debt to help persuade a reluctant JPMorgan to take over the business.

The Federal Reserve, America’s central bank, followed up on its Bear Stearns backstop by extending its discount window of cheap financing to the investment banks, initially for six months. The window had previously been open only to retail banks. The Fed said last week that the investment banks will be able to avail themselves of the cheap financing facility until January 31, 2008.

The US government is also sending out more than $100 billion of tax rebate cheques to consumers in the hope of boosting their spending. It has also sought and received approval from Congress to inject billions of dollars into Fannie Mae and Freddie Mac, the two struggling mortgage giants that underpin the housing market, if needed.

Despite the Government’s interventions, consumers and investors are running scared. In an illustration of the panic that the credit crunch has set off, customers queued around the block in California last month after a run on IndyMac forced regulators to take over the bank. Most of the people waiting were in no danger of losing their money because of the insurance policies they held, but they chose to attempt to retrieve their cash anyway.

Nor is there any sign that the fallout from the housing crisis is anywhere near over. Last week a fire sale of collateralised debt obligations (CDOs), or pools of bonds, from Merrill Lynch to Lone Star, the private equity fund, for 22 per cent of their face value in the first significant sale of these kind of assets, gave the doomsayers the proof they needed that banks were overvaluing these assets.

Sean Egan, of Egan Jones Ratings, predicted that banks would need to write off the value of their remaining mortgage-backed security holdings by "hundreds of billions of dollars" as a result of the Merrill sale.

This week, the bad news has continued. On Monday, HSBC announced a $2.9 billion pre-tax first half loss for North America, compared with a profit of $2.4 billion the year before, as the division made $6.8 billion of provisions against bad loans. The unit’s hit from the US housing crisis is more than $32 billion.

Nor did Freddie Mac, the mortgage financing giant that owns or guarantees $2,200 billion of mortgages and related home-loan assets, provide any encouragement with the release of its latest results on Wednesday.

Not only did Freddie announced a second-quarter loss of $821 million that was four times as great as the consensus analyst forecast, but the group’s chief executive admitted he was clueless about how much longer the housing crisis would run.

"Neither we nor anyone else can predict when the housing market will recover and it would be folly for anyone to try to do so," he said.

Coming from the head of America’s second biggest mortgage financier after Fannie Mae that is indeed an ominous warning.

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