US political leaders will go “back to the drawing board” and try to revive a €487bn financial rescue package today after Wall Street shares plunged to record lows as the Bill was rejected.
The Dow Jones index of blue chip firms fell by 778 points to 10365.45 – the largest one-day point drop on record – as the lower house of the US Congress voted against the Bill yesterday.
President George Bush said he was “disappointed” over its failure of the proposals he said were necessary to stave off financial panic and a “long and painful recession” in the US.
The Bill was rejected 228-205 by the US House of Representatives, with 133 Republicans and 95 Democrats refusing to back the rescue package.
The vote had been preceded by unusually aggressive lobbying and the president had used a “call list” of people he wanted to persuade to vote yes.
Members of the House shouted news of the plummeting Dow Jones average as others crowded on the House floor during the drawn-out and tense call of the roll, which dragged on for about 40 minutes as leaders on both sides scrambled to corral enough of their rank-and-file members to support the deeply unpopular measure.
Speaking in the Oval Office of the White House, Mr Bush said: “We put forth a plan that was big because we got a big problem.
“I’m going to be talking to my economic advisers... and we’ll be working with members of Congress – leaders of Congress, on the way forward.
“Our strategy is to continue to address this economic situation head on. And we’ll be working to develop a strategy that will enable us to continue to move forward.”
House Democrats and Republicans said they hoped to continue bipartisan negotiations and bring another economic Bill to the floor for a vote, possibly later this week.
All 435 members of the House are involved in elections on November 4 and the Bill, which would commit up to €487bn of taxpayers’ money and represents unprecedented private sector intervention, faced strong opposition from Republicans.
It also prompted protests in Wall Street and across the US last week.
In the UK, Gordon Brown pledged to do “whatever is necessary” to protect Britain’s financial system after the collapse of the bill.
The British Prime Minister said the vote was “very disappointing” but insisted the UK government was taking “decisive action” to tackle problems.
The economic crisis looked set to continue to dominate the US election.
Democratic presidential nominee Barack Obama said Americans should not panic but called for Democrats and Republicans to “step up to the plate” and “get it done”.
“And understand that even as you get it done to stabilise the markets, we have more work to do to make sure that Main Street is getting the same kind of help that Wall Street’s getting,” he said.
His Republican rival John McCain said it was time for Congress to “go back to the drawing board”.
“I call on Congress to get back, obviously, immediately to address this crisis,” he said. “Our leaders are expected to leave partisanship at the door and come to the table to solve our problems.
“I would hope that all our leaders, all of them, could put aside short-term political goals and do what’s in the best interests of the American people.”
Speaking outside the White House, US treasury secretary Hank Paulson, who proposed the basis of the $700bn (€487bn) package more than a week ago, said: “We’ve got much work to do and this is much too important to simply let fail. We need to work as quickly as possible.
“I am committed to continue to work with my fellow regulators to use all the tools available to protect our financial system and our economy.
“Our tool kit is substantial but insufficient. Therefore I will continue to work with congressional leaders to find a way forward to pass a comprehensive plan to stabilise our financial system and protect the American people by limiting the prospects of further deterioration in our economy.”
On Capitol Hill, House Republicans blamed a partisan speech by Democratic Speaker Nancy Pelosi, in which she criticised the Bush administration’s “reckless economic policies” and “fiscal irresponsibility”, for the Bill’s failure.
John Boehner, the Republican minority leader, said: “I do believe we could have got there, had it not been for this partisan speech that the Speaker gave on the floor of the House.
“The Speaker had to give a partisan voice that poisoned our conference, caused a number of members that we thought we could get to go south.”
Ms Pelosi said Democrats understood “the gravity of the situation” and that “action was necessary to stabilise the markets and to protect the taxpayer”.
“We delivered on our side of the bargain,” she said. “Clearly that message has not been received yet by the Republican caucus.”