Henry Paulson, the US Treasury Secretary, urged Congress to approve swiftly a support package for Fannie Mae and Freddie Mac to make sure the two mortgage giants, which collectively underpin America’s housing market, can continue to prop up the home-loan financing system.

Mr Paulson said that the health of Fannie Mae and Freddie Mac, which own or guarantee more than half of America’s $12,000 billion (£6 billion) of outstanding mortgages, would be "central to the speed with which we emerge from the housing correction".

The Congressional Budget Office estimates a plan to allow the Treasury Department to buy equities in Fannie Mae, Freddie Mac and the Federal Home Loan Banks would likely cost $25 billion in 2009 and 2010.

Fannie Mae and Freddie Mac are an essential form of mortgage financing since they buy home loans from mortgage lenders, package them into securities and sell them to investors.

The mortgage lenders then use the money they receive from selling their loans to Freddie or Fannie to offer new mortgages.

However, the two groups, which guarantee the securities they sell, have fallen on hard times and the US Government is looking to take steps to ensure that they are able to weather the tens of billions of dollars of losses they are expected to suffer from the worst American housing crisis since the Great Depression.

But the Government needs permission from Congress for a range of measures, including the possibility of injecting cash into Fannie Mae and Freddie Mac in return for newly issued shares and the extension of credit lines to the groups.

In his speech, made in New York, Mr Paulson predicted that Congress would "act to complete work on this legislation this week."

The House is expected to vote on the support plan as part of a larger housing rescue package on either Wednesday or Thursday.

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