The House this afternoon voted to reject compromise legislation to provide a $700 billion bailout of the nations financial institutions.
The market plunged as the vote was being taken, as the Dow Jones industrial average plummeted as much as 705 points.
The vote 228 against and 205 in favor was a major defeat for the Bush administration, which has been contending that the bailout was needed to prevent a disaster to the nations economic system.
After the vote, House GOP and Democratic leaders blamed the bills failure on each other, but vowed to continue working to try to come up with a workable compromise.
GOP leaders blamed what they characterized as partisan remarks by House Speaker Nancy Pelosi, D-Calif., for alienating many Republicans. Wed like to find a way to deliver enough Republican votes to make this happen, said House Republican Whip Roy Blunt of Missouri, in remarks to reporters after the vote.
We need everybody to calm down, relax and get back to work, added House Republican Leader John Boehner of Ohio.
Leading Democrats, meanwhile, blamed Republican leaders for failing to deliver sufficient votes in what was supposed to be a bipartisan initiative.
Democrats more than lived up to their part of the bargain, said Ms. Pelosi, in an after-the-vote news conference. What happened today cannot stand. We must move forward.
House Financial Services Committee Chairman Barney Frank, D-Mass., said at the same news conference that Democrats were ready to continue trying to forge a deal on legislation as long as Treasury Secretary Henry Paulson would work with House Republicans to ensure that any new measure can get sufficient Republican votes.
I still believe its important for this country to come up with legislation that will alleviate this credit crisis, Mr. Frank said.
The final tally on the vote was 95 House Democrats opposing the measure while 140 voted for it. The vote among Republicans was 133 against and 65 in favor.
In a statement, Michele Davis, assistant secretary for public affairs and director of policy planning for the Treasury Department, said Mr. Paulson will be consulting with President Bush and congressional leaders to figure out the next steps. In the meantime, we stand ready to work with fellow regulators and use all the tools at our disposal, as we have over the last several months, to protect our financial markets and our economy, Ms. Davis said.