New York/Washighton, September 29
US lawmakers rejected a $700 billion bailout plan for the financial industry in a shock vote that sent global markets sliding as the world credit crisis claimed more banks.

By a vote of 228-to-205 the House of Representatives rejected a compromise plan that would have allowed the Treasury Department to buy up toxic debt from struggling banks.

The plan’s defeat sent US stocks down sharply, with the Dow Jones industrial average briefly falling more than 700 points, its biggest intra-day drop ever.

Shares had already been under pressure following sharp declines in Asian and European shares on fears the crisis was spreading. Global money markets remained frozen, even as central banks poured in cash in an attempt to boost liquidity. Capping three hours of debate on Capitol Hill, House Majority leader Steny Hoyer of Maryland had warned lawmakers that the cost of inaction would be an economic calamity beyond Wall Street.

“A meltdown would begin, it is true, on a few square miles of Manhattan, but before it was over, all of us know, no city or town in America would be untouched,” Hoyer said.

When the contentious bailout plan was announced by the Bush administration last week, some House Republicans balked at spending so much taxpayer money just before US elections. Republican House members voted against the bailout by a more than 2-to-1 margin. A majority of Democrats voted in favour.

President George W. Bush had urged lawmakers to pass the bailout package quickly, saying it was needed to keep the financial crisis from spreading.