House votes down massive bailout measure

Washington: The House of Representatives on Monday defeated a $700 billion emergency rescue package, ignoring urgent pleas from President George W. Bush and bipartisan congressional leaders to quickly bail out the staggering
US financial industry.

Stocks plummeted on Wall Street even before the 228-205 vote to reject the bill was announced on the House floor.

When the critical vote was tallied, too few members of the House were willing to support the unpopular measure with elections just five weeks away. Ample no votes came from both the Democratic and Republican sides of the aisle.

Bush and a host of leading congressional figures had implored the lawmakers to pass the legislation despite howls of protest from their constituents back home.

The overriding question for congressional leaders was what to do next. Congress has been trying to adjourn so that its members can go out and campaign. And with the Nov. 4 Election Day looming, there was no clear indication of whether the leadership would keep them in Washington. Leaders were huddling after the vote to figure out their next steps.

A White House spokesman said that Bush was "very disappointed."

"There's no question that the country is facing a difficult crisis that needs to be addressed," Tony Fratto told reporters. He said the president will be meeting with members of his team later in the day "to determine next steps."

Fear sweeps across markets

Fear swept across the financial markets Monday, sending the Dow Jones industrials down as much as 705 points, after the government's financial bailout package failed the House.

As the vote was shown on TV, stocks plunged and investors fled to the safety of the credit markets, worrying that the financial system would keep sinking under the weight of failed mortgage debt.

"Clearly something needs to be done, and the market dropping 400 points in 10 minutes is telling you that," said Chris Johnson president of Johnson Research Group. "This isn't a market for the timid."

While investors had some worries that the vote would be close, many investors appeared to believe it would ultimately pass.

The markets were highly volatile, with the Dow regaining ground then falling backing again, trading down 557.30, or 5.00 percent, to 10,585.83. At its low, it was down 705.06, not far from its previous record for an intraday drop, 721.56, set during the first trading day after the Sept. 11, 2001, terror attacks.

Broader stock indicators also tumbled. The Standard & Poor's 500 index declined 77.16, or 6.36 percent, to 1,136.11, and the Nasdaq composite index fell 146.66, or 6.72 percent, to 2,036.68.

The Federal Reserve declined to comment on the market's decline.

With Wall Street in turmoil, the yield on the 3-month Treasury bill fell to 0.32 percent from 0.87 percent on Friday. That showed that investors were prepared to get meager returns on an investment as long as it was secure.

Marc Pado, US market strategist at Cantor Fitzgerald, said investors are worried about the spread of troubles beyond banks in the US to Europe and other markets.

"Things are dying and breaking apart while they sit there and vote on this thing," he said.

The dollar fell against other major currencies, while gold prices rose.

Light, sweet crude fell $11.39 to $95.50 on the New York Mercantile Exchange as investors feared that a worsening economy would slice into energy demand. If the decline held, it would be oil's largest ever one-day drop.