WASHINGTON - The historic effort to rescue the U.S. financial system was thrown into doubt yesterday after the House rejected a $700 billion emergency plan, sending stocks to their deepest one-day point loss ever. Stunned leaders of both parties and the White House scrambled to put together a new effort to bolster confidence in the U.S. financial system after the legislation that was widely expected to pass the House fell victim to partisan acrimony.
Officials and lawmakers said they hope ailing financial institutions and frightened markets could hold on until Thursday, when the House might take up the legislation again after a two-day break for observance of Jewish holidays.
Senate leaders showed no inclination to try to bring the measure to a vote before they could determine its fate in the House. President Bush, meanwhile, was scheduled to make a statement on the rescue plan this morning, the White House said.
FOR THE RECORD - An article on page 8 of the news section of Tuesday's Baltimore Sun incorrectly reported the number of Democratic members of Congress who voted against the financial rescue plan that was rejected by the House of Representatives on Monday. Voting against the legislation were 133 Republicans and 95 Democrats.
THE BALTIMORE SUN REGRETS THE ERROR
"We need to work as quickly as possible," Treasury Secretary Henry M. Paulson Jr. said after briefing Bush at the White House. "We need to get something done."
The vote was seen as a defeat for an outgoing administration with waning powers of persuasion and as a product of a congressional culture so soured by years of rancor that it has become dysfunctional even at moments of national crisis. Public opposition to a bailout was the reason most frequently cited by Republicans and Democrats who voted "no."
The rescue plan would have permitted the Treasury Department to buy or insure up to $700 billion in mortgage-related assets in an effort to jump-start credit markets. In recent days, banks have stopped providing loans to each other, and officials warned that credit for small businesses and households would become unavailable.
"Markets around the world are under stress, and that reduces the availability of credit that businesses across America depend on to meet payroll and to purchase inventories," Paulson said. "Families, too, feel the credit crunch as it becomes more difficult to get car loans or a student loan."
The leaders of both parties had endorsed the bill, warning that Wall Street's woes were about to affect the pocketbooks of ordinary Americans.
"The legislation has failed. The crisis has not gone away," said House Speaker Nancy Pelosi, a California Democrat.
