House Votes Down Rescue Plan

Updated from 2:09 p.m. EDT

The House of Representatives voted down the Treasury's $700 billion financial bailout package Monday afternoon, sending stocks into a record freefall.

As reports of the vote -- 205 in favor of the measure and 228 against it -- came trickling into Wall Street, the Dow Jones Industrial Average plunged more than 700 points. The index ended the day with its biggest one-day point loss ever and its heftiest single-day percentage loss since trading reopened after the terrorist attacks of Sept. 11, 2001.

The contentious legislation, which had been reworked by both sides over the weekend, was intended to allow the government to buy up toxic mortgage-related securities clogging up bank balance sheets. It would represent the biggest government intervention in the nation's financial markets since the Great Depression.

While top lawmakers and the Bush administration seemed confident that the proposal had been altered enough to gain approval, apparently not enough were swayed.

The measure was slated for a Senate vote on Wednesday. It is unclear whether it will need a complete renegotiation and overhaul, or whether House members who supported the bill would be able to convince enough of their counterparts to approve the measure.

Treasury Secretary Henry Paulson, the engineer of the proposed bailout, expressed his "great disappointment" after the votes were tallied, but he also cited today's collapse of Wachovia (WB) as part of the reason why such a plan is "much too important to simply let fail."

He vowed, "I will continue to work with Congressional leaders to find a way forward to pass a comprehensive plan to stabilize our financial system and protect the American people by limiting the prospects of further deterioration in our economy."