House rejects bailout plan

Treasury’s $700 billion Wall Street rescue plan collapsed in the House Monday, sending a shock through financial markets and leaving the Bush Administration scrambling to find some new way to deal with the credit crunch facing the American economy.

The president said he was “disappointed” with the vote and vowed that his administration would “continue to address this economic situation head on.” But House Minority Leader John A. Boehner (R-Ohio) – who pushed hard for passage – warned that there was no obvious “path forward” and said, “We need everyone to calm down.”

Calm was nowhere to be found on Wall Street or on Capitol Hill. The Dow Jones Industrial Average closed down 777 points – its largest one-day point drop in history – and the House chamber turned into a scene of chaos and confusion after a tumultuous and emotional vote.

"The legislation has failed, but the crisis is not going away," said Speaker Nancy Pelosi (D-Calif.).

Treasury Secretary Henry Paulson promised to "continue to work with congressional leaders to stabilize our financial system."

Republican defections proved fatal to the massive government intervention, rejected 228-205. Despite bipartisan appeals from the leadership, anti-Wall Street sentiment and the huge scale of the proposed government intervention proved too much for Treasury to prevail.

Democrats more than delivered a majority of their caucus, and Pelosi held the vote open to bring her numbers up to 140 votes for the package. But Republicans never topped 70, and the final GOP split was 133 against the bill and only 65 for the measure.

There were immediate recriminations on both sides. A switch of just 12 members would have reversed the outcome, and 95 Democrats, many from the left wing of the party, contributed to the defeat.

After the vote, Republicans claimed that the Democratic leadership had been warned that fewer than 60 Republicans would vote for the bill. Democrats denied the claim, saying they never would have brought the bill to the floor if they had been told there was so little Republican support.

And indeed, as evening approached, Minority Whip Roy Blunt (R-Mo.) confirmed that he had told Democrats that he expected 75 Republicans to vote for the bill.

"I guess the Republican leadership is so weak John Boehner couldn't deliver 50 percent of the votes,” sneered Rep. David Obey (D-Wis.) “I thought these were big boys."

Republicans said Pelosi may have lost votes with a floor speech they considered too partisan. "We could have gotten it if it were not for this partisan speech that Speaker Pelosi gave,” Boehner said.

Added Rep. Chris Shays, a Connecticut Republican who also voted for the bill: “Nancy blew it.”

"That is an absurd accusation at a time when our country is in deep economic distress," a Pelosi spokesman fired back."You don't vote on a speech, you vote on a bill."

Financial Services Chairman Barney Frank (D-Mass.), a key negotiator on the bill, mocked the Republicans for blaming Pelosi, saying he would be "uncharacteristically nice" to a dozen Republicans if it meant they would back the package.

"I'm ready to work ... I still feel it's important for the country to come up with some legislation to address the credit crisis," Frank said.