"See, even if this program had been passed by the Congress, we have to work through and get all those homes sold and refinanced and people living in them with mortgages which they can pay," he said. "And that problem's going to take a whole lot of time (to fix)."

Jeff Thredgold, economic consultant to Zions Bank and president of Thredgold Economic Associates, believes the U.S. economy is in recession. "It's probably the middle of next year before we see more clear signs of housing improvement, economic improvement," he said. "But those are kind of conditioned on credit markets getting back to some rational level of performance and right now they are not."

Thredgold said that even though the Dow fell a record number of points on Monday, that represented only a 7 percent decline. In October 1987, for instance, the Dow fell 22.3 percent in a day.

"I think you have a lot of scared members of Congress, especially conservative Republicans, who don't want to vote for this and then have to go back and face an opponent who's going to rake them over the coals for government intervention," Thredgold said.

He believes there will be more bank failures possibly over the next week. He thinks the FDIC could increase the amount it insures a typical account, currently at $100,000. The Federal Reserve could cut interest rates even before its next scheduled meeting at the end of October, he said.

Lenders and Wall Street firms are scared. Credit is frozen. A government package could help create confidence in financial markets. "If they don't have confidence, they don't have anything," he said.

Thredgold believes another government proposal will be ready by the end of the week. "It's more creating a market where a market for bad assets doesn't exist," he said.

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 ease 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.

Hoping to pick up enough GOP votes for the next try, Republicans floated several ideas. One would double the $100,000 ceiling on federal deposit insurance. Another would end rules that require companies to devalue assets on their books to reflect the price they could get in the market.

In the meantime, Paulson said he would work with other regulators "to use all the tools available to protect our financial system and our economy."