The US House of Representatives Monday dramatically rejected a 700-billion-dollar Wall Street bailout, sending stocks crashing to their worst single day loss ever and deepening the US financial crisis.
|House representatives answers questions at a news conference on Capitol Hill September 29, 2008 in Washington, DC.|
As a palpable sense of fear ricocheted through Washington, President George W. Bush said he was "disappointed" that the bailout foundered, as Democrats accused Republican conservatives 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 votes (6.98 percent) and the Nasdaq crashed 199.61 points (9.14 percent) to 1,983.73, its lowest since 2005.
In scenes of suspense, tension and shock rarely seen on the House floor, Republican foes of the bill 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 a senior Democratic lawmaker said nothing would happen until at least Thursday as many members had gone home for the Jewish holiday of 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 Republican 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."
But Barney Frank, the top House Democrat in charge of negotiating the bill, dismissed such critics 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.
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.
There was no immediate reaction from McCain, who had boasted that he had helped bring the rebel Republicans along to vote for the deal.
But his economic advisor Doug Holz-Eakin blamed Obama for politicizing the situation -- an identical charge McCain critics threw at the Arizona senator last week after he injected himself into the process.
"Barack Obama failed to lead, phoned it in, attacked John McCain and refused to even say if he supported the bill," Holz-Eakin said.
Republican Congressman Paul Broun from Georgia compared the bill to a "huge cow patty with a marshmallow stuck in the middle of it."
Indiana Congressman Mike Pence, also a Republican, warned that the bailout ran counter to the principles of American government.
"Economic freedom means the freedom to succeed and the freedom to fail," he said.
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.