Bailout Voted Down; Dow Makes Record Drop; How SD Area Congress Members Voted

NEW YORK -- Wall Street has ended a stunning session with a huge loss, with the Dow Jones industrials plunging 777 -- the largest point drop ever -- after the failure of the financial bailout plan in the House.  

Stunned traders on the floor of the New York Stock Exchange watched on TV screens as the House voted down the plan. And they saw stock prices tumbling on their monitors.

The plan's failure means no one knows how the financial sector hobbled by hundreds of billions of dollars in bad mortgage bets will recover. The credit markets remain close to frozen as banks are too afraid to lend -- including loans to to other banks.

House leaders say they're reconvening Thursday instead of adjourning for the year as planned, after dealing a $700 billion financial market bailout a stunning defeat.

A Treasury Department official says Treasury Secretary Henry Paulson will do all he can to protect the financial markets and the economy after the House rejected a proposed $700 billion rescue bill for the financial system.

The House defeated the package Monday, ignoring urgent pleas from President Bush and bipartisan congressional leaders to quickly bail out the staggering financial industry.

An unscientific poll of SanDiego6.com readers since yesterday shows most do not think the bailout should be approved.

More than enough members of the House had cast votes to defeat the Bush administration-pushed bill, and the vote was being held open, apparently as efforts were under way to persuade people to change their vote.

A White House spokesman says President Bush is very disappointed in Monday's House vote rejecting the administration's rescue plan for the nation's financial industry.

Earlier President Bush urged lawmakers to pass the compromise financial system bailout bill they fashioned in marathon weekend bargaining, saying it is needed to "keep the crisis in our financial industry from spreading" across the economy.

Bush made the statement at the White House Monday morning, seeking to assure Americans that approving his administration's $700 billion rescue plan is the right thing to do.

He spoke amid continued nervousness in financial markets at home and overseas.

Bush argued that jittery U.S. taxpayers will benefit from a number of safeguards that lawmakers wrote into the pending legislation during weekend negotiations on Capitol Hill.

Treasury spokeswoman Michel Davis said Monday Paulson would be consulting with President Bush, Federal Reserve Chairman Ben Bernanke and congressional leaders on what next steps to take.

The agency that seized Washington Mutual last week and brokered its sale to JPMorgan Chase for $1.9 billion says the deal stands whether the government's $700 billion banking bailout proceeds or not.

Federal Deposit Insurance Corp. spokesman David Barr says Citigroup's $2.1 billion purchase of Wachovia -- also arranged by the FDIC -- hasn't closed yet.

The plan would allow JPMorgan to sell WaMu's troubled mortgage-related assets to the government -- at a profit.

"There's no question that the country is facing a difficult crisis that needs to be addressed," said spokesman Tony Fratto. He said the president will be meeting with members of his team later in the day "to determine next steps."

Bush is "very disappointed" with the vote, Fratto said.

The fate of the rescue package remained in doubt as Democrats and Republicans both said they wanted to resurrect it. They were locked in a brutal round of partisan finger-pointing over why it failed.

The Senate had planned a Wednesday vote on the measure. President Bush and his economic advisers, as well as congressional leaders in both parties say it's vital to insulate ordinary Americans from the effects of Wall Street's bad bets.

Only One San Diego Area Member of Congress Voted For the Bailout Plan

The bulk of San Diego's congressional delegation voted Monday against the proposed $700 billion bailout of U.S. financial institutions, but agreed that lawmakers need to work fast to come up with an alternative now that the House has rejected the plan.

Rep. Darrell Issa, R-Vista, opposed the plan as a "bad deal fortaxpayers.''

"The American people spoke clearly and forcefully against this bailout scheme, which was crafted by a privileged few meeting behind closed doors,'' Issa said.

"During the last week, members of Congress have been meeting with economic experts outside the government and have heard many alternatives that are less costly and worthy of consideration,'' he said. "It's now time for Congress to open up the process and weigh other ideas for getting our economy on the right track. The real effort to fix our economy starts now.''

Also voting against the proposal was Rep. Brian Bilbray, R-Carlsbad.

"It is not the responsibility of the American taxpayers to foot a $700 billion bill for the irresponsible actions of Wall Street and borrowers,'' Bilbray said. "I am not opposed to appropriate government intervention, but socializing the capital market is wrong.''

He called on Congress to stay in session until a "responsible proposal'' is crafted to address the problem and its root causes.

The proposal by the federal government to assume as much as $700 billion in bad debt held by the nation's financial institutions in order to shore up Wall Street was backed by President Bush at the urging of Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke.

The House voted 228 to 205 to reject the plan. While opposing votes were recorded on both sides of the isle, a majority of Republicans were opposed, while most Democrats supported the bill.

The Dow closed down 777 points following the vote, the largest single-day point decline ever.

Rep. Susan Davis, D-San Diego, the lone area member of Congress to vote in favor of the bill, said the proposal was about  "insulating average Americans from Wall Street's excessive behavior.''

"There is not one member of Congress who is pleased about the need to take this extraordinary action,'' Davis said.

"I didn't come to Congress to cast easy votes,'' she said.  "It was avery difficult vote. I weighed the options and felt it was the right thing to do. I am prepared to go back to the drawing board and work this out.''

Davis said no bill would be a "magic bullet,'' but the "cost of doing nothing may be far greater than the painful steps we take today.''

Rep. Bob Filner, D-San Diego, described the proposal as an "economic Iraq.''

"The Bush Administration wanted a blank check -- with no accountability,'' Filner said. "They proposed that the same people who got us into this mess be charged with fixing it.''

Filner said the estimated $700 billion cost of the plan was "deceptively low.''

"It is time to go back to the drawing board -- to reject a 'trickle-down' plan and go directly to the heart of the problem: Keeping people in homes threatened by foreclosure. Investing in public infrastructure. Creating an alternative energy policy.''

Rep. Duncan Hunter, R-El Cajon, also voted against the legislation, arguing that it may not have any "real or lasting impact'' and would have brought "us one step closer to a nationalized economy.''

"There are certainly steps Congress should take to address the current condition of our financial and housing markets, but a taxpayer funded bailout of Wall Street is definitely not one of them,'' Hunter said.