Wall Street humiliated by nationalisation of banks.

When Gordon Brown and other European leaders promised to guarantee bank deposits and lending, they appear to have forced George Bush's hand and made him follow suit lest American finance migrate overseas.

And yesterday, despite initial reluctance, the US government took shares in nine national banks, with the possibility that others may follow.

The US government is set to become the largest shareholder in its national banks, pumping in $250bn (£143bn) to prop up its financial system and marking one of the most startling moments in a credit crisis that has brought quasi-nationalisation to the home of free-market capitalism.

The moves are "not intended to take over the free market but to preserve it", he promised. "This is an essential short-term measure to ensure the viability of America's banking system."

Bush can call it whatever he wants but it's simply nationalisation under another name.

In recent weeks, governments around the world have had to respond to the financial crisis with extraordinary measures and dizzying speed. The financial system came close to calamity in the days after the Bush administration, arguing that markets should be allowed to work difficulties through without government help, let the investment bank Lehman Brothers fail last month. Before a week was out, however, the US government had to take over the world's largest insurance giant, AIG, and promise to guarantee all the money in the $3 trillion money market industry. Last month, it became the country's largest mortgage lender when it took over the tottering mortgage finance giants Fannie Mae and Freddie Mac in a rescue bid that could cost taxpayers $200bn.

Almost without any thought, the actions usher in a new and unpredictable era in American capitalism.

"It wasn't just the right move, it was the only move," Ken Rogoff, Harvard University economist, said of yesterday's cash injection. "Thank goodness they didn't dally for another week to finally figure it out."

What I find utterly extraordinary in all of this is that we are witnessing the death of Reaganism, we are seeing the final proof that the market does not somehow magically correct all wrongs, and that deregulation is not the answer to all the world's ills.

What's even more extraordinary is that this is all being carried out by the party who have spent the best part of the last thirty odd years canonising Reagan as their patron saint and falling over themselves to state how much they love him and how like him they all are.

And now, as a result of the deregulation which Reagan made his raison d'etre, they are having to intervene to prevent the entire collapse of free market capitalism itself.

They do so, against their will, and whilst calling it anything but what it is. But, if it looks like a duck...

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Tags: Wall Street, financial crisis, Bush, Reagan, Republicans