WASHINGTON — The historic effort to rescue the U.S. financial system was thrown into doubt Monday after the House rejected a $700-billion emergency plan, causing the most devastating stock market collapse in 21 years and the deepest one-day point dive ever by the Dow.
Stunned leaders of both parties and the White House scrambled to put together a new remedy after the legislation that was widely expected to pass the House fell victim to partisan acrimony.
Administration officials and lawmakers said they hoped ailing financial institutions and frightened markets could hold on till Thursday, when the House again may take up the legislation after a two-day break for observance of Jewish holidays.
"We need to work as quickly as possible," Treasury Secretary Henry M. Paulson said tensely after briefing President Bush at the White House. "We need to get something done."
The vote was seen as a defeat for an outgoing administration with waning powers of persuasion and as a product of a congressional culture so soured by years of rancor that it has become dysfunctional even at moments of national crisis. Public opposition to a bailout was the reason most frequently cited by both Republicans and Democrats who voted "no."
The leaders of both parties had endorsed the bill, warning that Wall Street's woes were about to strike a blow at the pocketbooks of ordinary Americans.
"The legislation has failed. The crisis has not gone away," House Speaker Nancy Pelosi (D-San Francisco) said.
The drama was palpable in the House chamber when, as "no" votes were outpacing "aye" votes, a Democratic leader began to circle the chamber, repeating: "The market is falling. The market is falling." On the floor of the New York Stock Exchange, meanwhile, traders fell silent as they watched television screens showing the House vote falter.
In the end, the rescue plan failed by a vote of 228 to 205. The Dow Jones industrial average plummeted 777.68 points to close at 10,365.45 -- not only a record point drop but also the stock index's lowest level since 2005. Markets in Canada, Mexico and Brazil also stumbled on the news.
"The markets answered the question today for everyone -- in case anyone had any doubts -- about whether no action was acceptable," Senate Minority Leader Mitch McConnell (R-Ky.) said. "No action is not an answer."
Chastened, leaders of both sides pledged to keep working to pass the bill. Senate leaders said they hoped to vote by the end of the week.
