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By Chris Cermak Sep 29, 2008, 20:56 GMT

Shares plummet as US financial rescue plan fails (Roundup)

Washington - The US House of Representatives on Monday rejected a massive government plan to rescue the economy from the brink of financial meltdown, sending Wall Street stocks plummeting. A file photograph showing Trader Philip Clark Jr. working two phones while working in the euro dollar options pit. US stocks plunged more than 5 per cent 29 September 2008 after the US House of Representatives rejected a hotly debated 700-billion-dollar rescue plan for the US financial system. EPA/TANNEN MAURY

A file photograph showing Trader Philip Clark Jr. working two phones while working in the euro dollar options pit. US stocks plunged more than 5 per cent 29 September 2008 after the US House of Representatives rejected a hotly debated 700-billion-dollar rescue plan for the US financial system. EPA/TANNEN MAURYDemocratic and Republican legislators traded blame for the failure but promised to head back to the drawing board in the coming days. The House voted 228-205 against the 700-billion-dollar bail-out plan. Minority Republicans in the House led the opposition, voting 2- 1 against the bill. The rejection came despite dire warnings of an economic collapse and support for the bill from congressional leaders of both political parties, as well as US President George W Bush. US stocks plunged by the most in seven years on the news, with the three leading stock indices shedding massively. The Dow Jones Industrial Average lost 7 per cent; the S&P 500 shed 8.80 per cent; the Nasdaq high tech index dropped more than 9 per cent. Bush said he was disappointed in the vote and would be consulting with his economic advisors in the coming days to work out a way forward. 'I was disappointed in the vote with the United States Congress on the economic rescue plan. We put forth a plan that was big because we got a big problem,' the president said. '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.' Congressional leaders and White House officials thought they had forged an agreement Sunday after nine days of tough negotiations. But lower-level legislators in both parties derailed the process, resenting the need to put taxpayer money on the line to bail out greedy Wall Street investors. 'The legislation has failed, the crisis has not gone away, we must work in a bipartisan way in order to have another bite at the apple,' Democratic House Speaker Nancy Pelosi said. The bill was intended to free up credit availability for US consumers with the government purchase of up to 700-billion-dollars worth of soured mortgage-backed securities. It included a 'repayment clause,' under which Wall Street would have to find a way to pay the money back if the assets' value did not recover in five years. John Boehner, the top Republican in the lower chamber, promised to go back and find a compromise in the coming days. 'We need everybody to calm down and relax and get back to work,' he told reporters after the vote. But it was unclear exactly when or how another compromise would come about. Many legislators opposed the measure on a principle that Wall Street must carry more of the burden and called it an unnecessary intervention into the free market. 'We can't allow the American taxpayer to become the insurance policy for financial decisions that didn't quite turn out as planned,' said Gresham Barrett, a Republican congressman from South Carolina. Leaders from both parties had recognized the legislation was an incredibly bitter pill to swallow and one of the most difficult decisions Congress would ever make, coming just one month before the US general election. But the bill's supporters, during a spirited four-hour debate in the chamber, said it was the only means of preventing credit - the backbone of the US economy - from drying up completely. Republican Minority Leader Boehner blamed Pelosi for a partisan speech shortly before the final vote, which derailed a shaky truce and turned off a dozen or so Republicans that had been prepared to vote in favour. Democrats rejected the accusation. During week-long negotiations on the 700-billion-dollar proposal, legislators reduced the initial cost to 350 billion dollars with the remainder to be authorized later. Other changes to the plan originally drafted by US Treasury Secretary Henry Paulson included curbs on executive pay, greater oversight and methods for the government to take stakes in some companies that profit from the bail-out. Bush, who has less than four months in office, has little remaining clout with his fellow Republicans in Congress, who already blame his low approval ratings for their loss of a majority in congressional elections two years ago. Democrats were also worried about the political fallout of the unpopular Wall Street bail-out as expressed by constituents via angry e-mails and phone calls to legislators. Meanwhile, the financial turmoil continued. The Federal Reserve announced fresh moves to inject liquidity into the market, while Citigroup Inc agreed to take over the banking operations of fourth- largest US bank Wachovia Corp. The financial crisis has already led to two of the largest bankruptcies in US history - Lehman Brothers Holdings Inc and Washington Mutual Inc - as well as a series of government takeovers in the US and Europe.

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QuarkSep 29th, 2008 - 21:29:26

I'm glad it failed. A correction is way overdue and things are going to be bad. Very bad. But delaying it will only make it worse. I worked my way up from poverty once, I can do it again. Even easier this time since I wont' have so far to climb.

But, the think that has me most concerned is whether the sheeple are going to buy into the Demo's statements that it is the Republican's fault that there weren't enough votes..... ????? 95 Demos voted against it!!!! How can Pelosi blame the Rebublicans for not supporting it?

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protonSep 29th, 2008 - 22:56:21

Quite simply because more republicans voted against it ....

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HailCaesarSep 29th, 2008 - 23:15:44

'Semper avarus eget' (The greedy are always in need)
'Sumptus censum ne superet' (Let not your spending exceed your income)
....and as Virgil saw the final fall of Troy immenent,
'Venit summa dies et ineluctabile tempus' (Here comes big trouble for the Dow Jones Average)

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juhaSep 29th, 2008 - 23:17:43

bailing it out is finacially rewards those that caused it in the first place. Creating billions out of thin air to do what? the houses will still be there, they just lost equity nothing more. the prices have been reduced to a more resonable level...and not on its speculative value.
as for jobs or protecting jobs...sorry jobs have going overboard regardless of the housing market. manafacturing off shore with no account for employment standards or polution controls...yeesh.

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juhaSep 29th, 2008 - 23:25:53

hmmmmm... an imaginary meeting at a board room.

person A:ok we need to increase profits.
person B:i agree how about we increase interest rates on the credit cards and morgages.
person C:hmmmmm...couldnt we just increase it by 1/2 percent so that the clients can aclimatise themselves to the increase instead of a 3 percent jump.
person A:Naw i think the customers can afford the increase.
Person B:yep...they can afford it...plus it will increase our profits.
person C:but...what if they walk away from the morgages and the we lose share value of 50percent or more...wont that be worse then that piddly little profit gain?
person A:that will never happen...and by the way person C your fired for being so negative.
person B:I second the motion of firing person C.

and so the Big Bank Corp raise intersest rates....the first month was great...the books looked good...till the second month when the customers started miss their payments...the shares of the Big Bank Corp started to fall....of course the Person A and Person B who had shares and info after the 1st month sold their shares to capatlize on the good news. And are now sipping margerites in Tahiti.

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I am glad it failed too. I pay MY bills.Sep 29th, 2008 - 23:36:20

'Quite simply because more republicans voted against it ....'

1) The democrats have enough votes to pass it wothout republicans.

2) The democrats caused this mess to begin with:

www.youtube.com/watch?v=_MGT_cSi7Rs

If we are going to get Obama we are going to have another depression. A serious one.

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Rick CainSep 29th, 2008 - 23:59:59

The GOP still can't put down its partisan ways. They weren't content with controlling all three houses of government, they still were blaming democrats for their own failures.
Their libertarian counterparts were blaming democrats for 1977, conveniently ignoring that its libertarian-style deregulation that got us into this mess.
On the good side, the bill failed, as it should have. Thats not to say the taxpayer is off the hook. While this one didn't pass, the government sneaked in a bunch of smaller bailouts while we weren't looking, and with republican support.
Explain that one you fiscally conservative republicans. More bailouts to come, rich executives are suffering!

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JoyceSep 30th, 2008 - 00:05:54

it's gotta be awfully embarassing to be a republican these days.

so much evil in the name of being moral.

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solutionSep 30th, 2008 - 01:15:29

vote republican in november then kiss your ass goodbye

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SP4: why?Sep 30th, 2008 - 02:26:04

..are you unaware of what is happening? Do you need my assistance?

Pelosi doesn't know her job. She'd never have called a vote if she was not told she already had the votes. Her party deserted her.

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@ sp4Sep 30th, 2008 - 04:06:53

you say: 'Do you need my assistance?'
Reply: No, EssPee, nobody needs the ass-isstance of a drug addict. But YOU need the assistance of a professional. Go get your head straight, for the first time in your miserable lie of a little life.

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Shares plummet as US financial rescue plan fails (Roundup)

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