Dow dives as bailout bombs

WASHINGTON — 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' lawmakers and the Bush administration scrambling to pick up the pieces. Dismayed investors sent the Dow Jones industrials plunging 777 points, 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, leaving open the possibility that it could salvage a reworked version.

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.

All sides agreed the effort to bolster beleaguered financial markets, potentially the biggest government intervention since the Great Depression, could not be abandoned.

But in a remarkable display on Monday, a majority of House members slapped aside the best version their leaders and the administration had been able to come up with, bucking presidential speeches, pleading visits from Paulson and Federal Reserve Chairman Ben Bernanke and urgent warnings that the economy could nosedive without the legislation.

In the face of thousands of phone calls and e-mails fiercely opposing the measure, many lawmakers were not willing to take the political risk of voting for it just five weeks before the elections.

The bill went down, 228-205.

In Utah, economists for local banks believe that despite Congress' rejection of the emergency rescue bill, a government program to assist financial institutions is necessary for the economy.

Kelly Matthews, executive vice president and economist for Wells Fargo & Co. in Salt Lake City, said that the market on Monday might have lost $1 trillion, a figure much larger than the $700 billion program that was shot down by Congress.

"I can understand why the population, at least from what was transmitted to the Congress, had a lot of reluctance relative to this proposal," Matthews said. "But when you put it in perspective, we lost more today in value than what was being discussed. That sort of indicates maybe why we needed the program."

Matthews believes that even with a government program, it could take a year or two for the mortgage problems to be alleviated.