WASHINGTON (AFP) — The US House of Representatives dramatically rejected a 700-billion-dollar Wall Street bailout, sending stocks crashing to one of their worst single day losses ever and deepening the US financial crisis.
As a palpable sense of fear ricocheted through Washington, President George W. Bush said he was "disappointed" that the bailout foundered, as Democrats accused conservative Republicans of killing the bill for ideological reasons.
The president immediately summoned top advisers to tackle the latest crisis "head on," and Treasury Secretary Henry Paulson was seen hurrying into the West Wing of the White House.
Shockwaves reverberated through the presidential race and congressional campaigns just five weeks before the November 4 general election, and a blame game erupted between Republicans and Democrats on Capitol Hill.
Amid panic selling on Wall Street, the Dow Jones Industrial Average plunged 777.68 points (6.98 percent) and the Nasdaq crashed 199.61 points (9.14 percent) to 1,983.73, its lowest since 2005.
And there were signs the contagion was spreading worldwide as Hong Kong share prices opened down 5.6 percent on Tuesday and Japanese shares prices were down 4.64 percent by the lunch break in reaction to the House vote.
In scenes of suspense, tension and shock rarely seen on the House floor, Republican conservatives and rebel Democrats combined to doom the bill by 228 votes to 205, after Bush had pleaded for its passage.
House speaker Nancy Pelosi pledged to go back to work to pass a new bill.
But her number two Steny Hoyer said that the House would not meet until Thursday as many members had gone home for the Jewish holiday, Rosh Hashanah.
The 15-minute vote was kept open for 40 minutes as Democratic and Republican leaders made desperate attempts to twist arms of lawmakers who voted no.
One senior Democrat said Republicans had reneged on a pledge to get 50 percent of their caucus plus one member to vote for the bailout, pointing out that 60 percent of Democrats backed the plan.
Leading Democrat David Obey reacted bitterly, saying Republican leadership, including the president and presidential nominee John McCain, "have lost total control over their own party."
"Evidently some of those guys would rather lose an economy than lose an election."
House Republican Leader John Boehner blamed what he called a partisan speech to the House by Pelosi shortly before the vote.
"I don't know that we know the path forward from this point. We need everybody to calm down and relax and get back to work," he said.
But Barney Frank, the top House Democrat in charge of negotiating the bill, dismissed criticism of Pelosi's speech as pure "pettiness" and said Republicans were trying to cover up their embarrassment over the split party.
"Give me those 12 people's names and I will go talk uncharacteristally nicely to them," he said, refering to Republicans who could have changed tack to pass the measure.
Democratic White House hopeful Barack Obama meanwhile appealed for calm, seeking to stablize global markets and show composure-in-a-crisis leadership credentials.
"I'm confident that we're going to get there but it's going to be a little rocky," he said in Colorado.
"It's important for the markets to stay calm because things are never smooth in Congress and to understand that it will get done," Obama said.
McCain reacted by saying that "now is not the time to fix the blame; but it's time to fix the problem, though then went on to blame Obama for injecting politics into the vote.
"Our leaders are expected to leave partisanship at the door and come to the table to solve our problems," he said in Des Moines, Iowa.
"Senator Obama and his allies in Congress infused unnecessary partisanship into the process," he said, leveling a charge Democrats threw his way when he jetted into Washington last week to play a role in the Congressional talks.
The bailout proposal would grant the Treasury secretary authority to buy up toxic mortgage-related assets in troubled banks in hopes of easing the flow of credit and reviving the moribund housing market.
The bill would have immediately released 250 billion dollars to enable the government to buy up troubled assets, and sets a ceiling for all purchases of 700 billion dollars.
It also prohibits "golden parachutes" for CEOs or other executives who lose or leave their jobs at companies participating in the plan as long as the Treasury holds equity in those firms.
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