In a vote that shook the government, Wall Street and markets around the world, the House on Monday defeated a $700 billion emergency rescue for the nation's financial system, leaving both parties and the Bush administration struggling to pick up the pieces. The Dow Jones industrials, the most ever for a single day.
"We need to put something back together that works," a grim-faced Treasury Secretary Henry Paulson said after he and Federal Reserve Chairman Ben Bernanke joined in an emergency strategy session at the White House. On Capitol Hill, Democratic leaders said the House would reconvene Thursday in hopes of a quick vote on a reworked version.
All sides agreed the bill could not be abandoned.
On Monday, not enough lawmakers were willing to take the political risk - just five weeks before the elections - of backing a deeply unpopular measure that many voters see as an undeserved bailout for Wall Street.
The bill went down, 228-205, even though Paulson and congressional leaders proclaimed a day earlier that they had worked out an acceptable compromise in marathon weekend talks.
Lawmakers were caught in the middle. On one side were the dire predictions from Mr. Bush, his economic team, and their own party leaders of an all-out financial meltdown if they failed to approve the rescue. On the other side: a flood of protest calls and e-mails from voters threatening to punish them at the ballot box.
CBS Evening News Anchor Katie Couric interviewed House minority leader Rep. John Boehner, a Republican from Ohio and House majority leader Rep. Steny Hoyer, a Democrat from Maryland, about why congress failed to pass the bailout.
"Warren Buffett warned, if Congress doesn't act, 'there would be the biggest financial meltdown in American history.' What in the world are you people doing?" Couric asked Boehner.
The minority leader was quick to point out that many Americans are opposed to the bailout and that they are flooding congressional offices with phone calls warning their elected officials not to vote for the proposal.
"I was there on the floor today urging members to support this bill," Boehner said. "But you have to understand, you've got members on both sides of the aisle who are getting thousands of calls from their constituents saying, 'Don't ever vote for this.'"
On the other side of the aisle, Hoyer said Democratic leaders lived up to their end of the bargain and blamed partisan rhetoric for the Republicans' failure to hold up their end.
"Why weren't you able to deliver more Democrats so you could prevent this major failure of American government today?" Couric asked Hoyer.
"We delivered two-thirds of the Democrats for a proposal by the Republican President and the Republican Secretary of Treasury," Hoyer said. "So we think we did our job, and we worked very hard at making sure that we had that two-thirds vote."
Meanwhile, asked why conservative leaders couldn't muster enough votes to supplement liberal votes on the bill, Hoyer blamed "the Republican ideology" that "overcame their common sense"
"I think the Republican ideology overcame their common sense, overcame their sense of crisis and the request by their leaders to act so that this crisis could be, if not averted, at least diminished."
Republicans had won concessions to force banks and financial firms to pay their own fair share of any government bailout. And Democrats had held firm in demanding executive compensation caps and mortgage relief, reports CBS News correspondent Bob Orr. But, it all came undone.
The House Web site was overwhelmed as millions of people sought information about the measure.
The legislation the administration promoted would have allowed the government to buy bad mortgages and other sour assets held by troubled banks and other financial institutions. Getting those debts off their books should bolster those companies' balance sheets, making them more inclined to lend and easing one of the biggest choke points in a national credit crisis. If the plan worked, the thinking went, it would help lift a major weight off the national economy, which is already sputtering.
The House could take another crack at a bailout bill before the end of the week - but it won't be easy, reports CBS' Orr. Many conservatives insist they won't vote for any plan that uses taxpayer money to clean up Wall Street's mess.
Stocks started plummeting on Wall Street even before Monday's vote was over, as traders watched the rescue measure going down on television. Meanwhile, lawmakers were watching them back.
As a digital screen in the House chamber recorded a cascade of "no" votes against the bailout, Democratic Rep. Joe Crowley of New York shouted news of the falling Dow Jones industrials. "Six hundred points!" he yelled, jabbing his thumb downward.
The final stock carnage was 777 points, far surpassing the 684-point drop on the first trading day after the Sept. 11, 2001, terror attacks.
In the House, "no" votes came from both the Democratic and Republican sides of the aisle. More than two-thirds of Republicans and 40 percent of Democrats opposed the bill. Several Democrats in close election fights waited until the last moment, then went against the bill as it became clear the vast majority of Republicans were opposing it. Most vulnerable Republicans refused to back the bill.
In all, 65 Republicans joined 140 Democrats in voting "yes," while 133 Republicans and 95 Democrats voted "no."
The overriding question was what to do next.
"The legislation may have failed; the crisis is still with us," said House Speaker Nancy Pelosi, D-Calif., in a news conference after the defeat. "What happened today cannot stand."
Republican leader John Boehner, R-Ohio, said he and other Republicans were pained to vote for such measure, but he agreed that in light of the potential consequences for the economy and all Americans, "I think that we need to renew our efforts to find a solution that Congress can support."
Those positive comments aside, a brutal round of partisan finger-pointing followed the vote.
Republicans blamed Pelosi's scathing speech near the close of the debate - which assailed Mr. Bush's economic policies and a "right-wing ideology of anything goes, no supervision, no discipline, no regulation" of financial markets - for the defeat.
"We could have gotten there today had it not been for the partisan speech that the speaker gave on the floor of the House," Boehner said.
Rep. Roy Blunt, R-Mo., the whip, estimated that Pelosi's speech changed the minds of a dozen Republicans who might otherwise have supported the plan.
That amounted to an appalling accusation by Republicans against Republicans, said Rep. Barney Frank, D-Mass., chairman of the Financial Services Committee: "Because somebody hurt their feelings, they decide to punish the country."
More than a repudiation of Democrats, Frank said, Republicans' refusal to vote for the bailout was a rejection of their own president.
The two men campaigning to replace Mr. Bush watched the situation closely - from afar - and demanded action.
In Iowa, Republican John McCain declared, "Now is not the time to fix the blame; it's time to fix the problem."
In Colorado, Democrat Barack Obama said, "Democrats, Republicans, step up to the plate, get it done."
"We're all worried about losing our jobs," Rep. Paul Ryan, R-Wis., declared in an impassioned speech in support of the bill before the vote. "Most of us say, 'I want this thing to pass, but I want you to vote for it - not me.' "
With their dire warnings of impending economic doom and their sweeping request for unprecedented sums of money and authority to bail out cash-starved financial firms, Mr. Bush and his economic chiefs had focused the attention of world markets on Congress, Ryan added.
"We're in this moment, and if we fail to do the right thing, Heaven help us," he said.
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