US bailout halted in Congress

WASHINGTON, DC – US Treasury secretary Henry Paulson might need to get down on his knees again, after the US House of Representatives blocked his $700 billion bailout plan. The endorsements of Paulson, President George Bush and Federal Reserve governor Ben Bernanke did not count for enough, as the deal to buy out Wall Street’s toxic mortgage assets was voted down 228 to 205 yesterday.

The bill has the majority of Democrats in support (141:94), but the majority of Republicans (131:67) voted to kill the $700 billion federal intervention scheme, under which Treasury would have widespread freedom to buy billions of illiquid and low-valued US mortgage assets.

Paulson had already begged Democrat house leader Nancy Pelosi to help him limit opposition to the Treasury plan. Pelosi replied that it was Paulson’s fellow Republicans that were scuppering the scheme.

The failure means Paulson will have to go back to the drawing board, and markets on Wall Street and London fell considerably. New York’s Dow Jones fell 7% and London’s FTSE100 index of leading shares recording its greatest reduction of prices in three years.