WASHINGTON – Top congressional and White House officials, stunned when the House of Representatives rejected a massive rescue plan for the U.S. economy, scrambled to structure a new bailout proposal that would attract reluctant lawmakers and still soothe the unnerved financial markets.
"Doing nothing is not an option" House Majority Leader Steny Hoyer said after seeing the $700 billion emergency package for the nation's financial system fail 228-205 on Monday.
With the House not scheduled to meet again until Thursday, congressional leaders and Bush administration officials promptly sought to assess what types of changes could win over enough votes to guarantee success. President George W. Bush planned to make a statement on the rescue plan at 8:45 a.m. EDT Tuesday.
The outcome of Monday's vote fed a huge sell-off in the stock market, sending the Dow Jones Industrial Average into its biggest single-day plunge, dropping 777 points. The carnage spread Tuesday to Asia, with all major stock markets in the region tumbling sharply amid heightened fears of a broader global financial crisis.
The House vote and the market's terrified reaction shook Washington and New York centers of power, but no immediate solution seemed at hand.
The bill's failure came despite furious personal lobbying by President Bush and support from House leaders of both parties.
But the legislation was highly unpopular with the public, ideological groups on the left and the right organized against it, and Bush no longer wielded the influence to leverage tough votes. Even pressure in favor of the bill from some of the biggest special interests in Washington, including the U.S. Chamber of Commerce and the National Association of Realtors, could not sway enough votes.
The legislation the administration promoted would have allowed the government to buy bad mortgages and other deficient assets held by troubled financial institutions. If successful, advocates of the plan believed it would help lift a major weight off the already sputtering national economy.
Treasury Secretary Henry Paulson emerged after the vote and warned of a credit crunch that would affect American businesses and said families would find it harder to get student loans and car loans.
"We need to work as quickly as possible," he said gravely. "We need to get something done."
The sense of urgency was not universal. Many opponents of the bill argued that the package amounted to a too-costly commitment of taxpayer money to bail out financial institutions for their own mistakes.
Rep. Dean Heller, a Nevada Republican, offered a typical sentiment. "I cannot with good conscience put Nevada's taxpayers on the hook for the foolish excesses of Wall Street," he said. "Congress should pass legislation that protects the taxpayer, assists with bad assets and allows the market to correct itself."
Immediately following the vote, Republican leaders blamed their failure to secure more votes on the partisan tone of Speaker Nancy Pelosi's pre-vote speech on the House floor. "There were a dozen members who we thought ... we had a really good chances of getting on the floor," said Minority Leader John Boehner of Ohio. "And all that evaporated with that speech."
Democratic Rep. Barney Frank of Massachusetts, the gruff but quick witted chairman of the House banking committee, countered: "Give me the names of those 12 people and I'll go talk uncharacteristically nice to them"
Behind the bluster, lawmakers pledged to work again. Hoyer met with House Republican Whip Roy Blunt of Missouri, one of the lead Republican negotiators from the House.
Blunt, noting that the House would break for the Jewish holidays until Thursday, said: "We are going to have a couple days to see how the marketplace reacts to all this, and maybe that's a good thing."
House members were not going home to campaign for re-election "until this is addressed," Hoyer vowed.
Both Blunt and Hoyer suggested that the Senate could vote first on a bill then send it to the House, but Senate leaders showed no inclination to take up a bill without being certain of its fate in the House.
"What would be wrong, I think, would be to act without some kind of clear indication from the House about how they're going to proceed," said Sen. Christopher Dodd of Connecticut, the chairman of the Senate Banking Committee. "We don't need to start all over."
The two men campaigning to replace Bush watched the situation closely — from afar — and demanded action.
In Iowa, Republican John McCain said his rival Barack Obama and congressional Democrats "infused unnecessary partisanship into the process. Now is not the time to fix the blame; it's time to fix the problem."
Obama said, "Democrats, Republicans, step up to the plate, get it done."
The burden for votes fell more strongly on Republican leaders. About three out of five House Democrats voted for the legislation; only a third of Republicans backed it.
Republicans, already seeking possible votes, 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.