The House on Monday defeated a $700 billion emergency rescue for the nation's financial system, ignoring urgent warnings from President Bush and congressional leaders of both parties that the economy could nosedive into recession without it.
Stocks plummeted on Wall Street even before the 228-205 vote to reject the bill was announced on the House floor.
Bush and a host of leading congressional figures had implored the lawmakers to pass the legislation despite howls of protest from their constituents back home. Despite pressure from supporters, not enough members were willing to take the political risk just five weeks before an election.
Ample 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.
The overriding question for congressional leaders was what to do next. Congress has been trying to adjourn so that its members can go out and campaign. And with only five weeks left until Election Day, there was no clear indication of whether the leadership would keep them in Washington. Leaders were huddling after the vote to figure out their next steps.
A White House spokesman said that President Bush was "very disappointed."
"There's no question that the country is facing a difficult crisis that needs to be addressed," Tony Fratto told reporters. He said the president will be meeting with members of his team later in the day "to determine next steps."
"Obviously we are very disappointed in this outcome," Fratto said. ". There's no question that the country is facing a difficult crisis that needs to be addressed. The president will be meeting with his team this afternoon to determine the next steps and will also be in touch with congressional leaders."
Monday's mind-numbing vote had been preceded by unusually aggressive White House lobbying, and spokesman Tony Fratto said that Bush had used a "call list" of people he wanted to persuade to vote yes as late as just a short time before the vote.
Lawmakers shouted news of the plummeting Dow Jones average as lawmakers crowded on the House floor during the drawn-out and tense call of the roll, which dragged on for roughly 40 minutes as leaders on both sides scrambled to corral enough of their rank-and-file members to support the deeply unpopular measure.
They found only two.
Bush and his economic advisers, as well as congressional leaders in both parties had argued the plan was vital to insulating ordinary Americans from the effects of Wall Street's bad bets. The version that was up for vote Monday was the product of marathon closed-door negotiations on Capitol Hill over the weekend.
"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, Bush and his economic chiefs have 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.
The legislation the administration promoted would have allowed the government to buy bad mortgages and other rotten assets held by troubled banks and 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 the credit crisis. If the plan worked, the thinking went, it would help lift a major weight off the national economy that is already sputtering.
The fear in the financial markets send the Dow Jones industrials cascading down by as over 700 points at one juncture. As the vote was shown on TV, stocks plunged and investors fled to the safety of the credit markets, worrying that the financial system would keep sinking under the weight of failed mortgage debt.
"As I said on the floor, this is a bipartisan responsibility and we think (Democrats) met our responsibility," said House Majority Leader Steny Hoyer, D-Md.
Asked whether majority Democrats would try to reverse the stunning defeat, Hoyer said, "We're certainly not going to abandon our responsibility. We'll continue to focus on this and see what actions we can take."
Several Republican aides said House Speaker Nancy Pelosi, D-Calif., had torpedoed any spirit of bipartisanship that surrounded the bill with her scathing speech near the close of the debate that blamed Bush's policies for the economic turmoil.
Without mentioning her by name, Rep. Adam Putnam, R-Fla., No. 3 Republican, said: "The partisan tone at the end of the debate today I think did impact the votes on our side."