, which opened Monday with hefty losses, reacted sharply to the failure of the Treasury's
in the House of Representatives. The
Dow Jones Industrial Average
, which was down some 300 points ahead of the vote, was sent reeling as news of the tally emerged. The Dow ended Monday down 777 points, its steepest one-day point loss in the history of the index.
With the bailout representing the only rescue plan on the table, its defeat could mean more bank failures, lost jobs and recession for the next president and Congress to face. The stakes couldn't be higher.
Amazingly, the bill
by a razor-thin margin -- 228 against the bailout vs. 205 votes in favor of it. Its passage would have required just another 12 votes. Both the Democratic and Republican caucuses heaped blame on each other for the bill's defeat. But who really choked in terms of rallying support from their own party? It would appear the biggest losers were the leaders of the Democrats in the House: Speaker Nancy Pelosi (D., Calif.) and Steny Hoyer (D., Md.).
Pelosi and other Democrats, such as Rep. Barney Frank (D., Mass) and Sen. Chris Dodd (D., Conn.), played an important role in negotiating an agreement with the White House on the bailout bill. Democratic leadership owned this version of the bill.
Speaker Pelosi spoke on the floor of the House in favor of the bill in the hope of offering cover to her caucus:
"It is a number that is staggering, but tells us only the costs of the Bush administration's failed economic policies -- policies built on budgetary recklessness, on an anything-goes mentality, with no regulation, no supervision and no discipline in the system."
Her efforts fell short. The Democrats managed to muster only 60% of their members behind the bill and needed a mere 5% more to ensure passage -- 140 supported the bill and 95 opposed it. She held the vote open for 40 minutes trying to turn nays into yeas.
Republicans blasted Pelosi for her remarks. They called her comments partisan and blamed her for losing enough Republican support: "All that evaporated after her speech," said House Minority Leader John Boehner (R., Ohio). Republicans voted overwhelmingly against the bill: 133 against and 65 in favor.
Rep. Frank, a Democrat, blasted House Republicans for not supporting the bill, calling it "pettiness." He said:
"But think about this: Somebody hurt my feelings so I will punish the country. I mean, that's hardly plausible. And there are 12 Republican members who were ready to stand up for the economic interests of America but not if anybody insulted them."
Republicans in the House already held some bitterness because they were conspicuously shut out of talks over the bill. House Republicans had met with Sen. John McCain (R., Ariz.) to discuss the plan, though none of their recommendations made it into the final legislation, including a recommendation of zero capital gains for investors. McCain had assumed enough of them would vote for the bill.
In fact, McCain had lauded himself for getting involved in the process. "Some people have criticized my decision, but I will never, ever be a president who sits on the sidelines when this country faces a crisis," he said Monday morning. He tried to maintain his resolute nature after the defeat, declaring that he would continue to work for a rescue plan.
The failure of the bill leaves lawmakers scrambling in Washington. Leaders in the Senate plan to consider minor revisions and hope to take a vote on Thursday. "We don't intend to leave here without the job being done," said Dodd, who is chair of the Senate Banking Committee.
Lawmakers in Washington might want to watch the ticker tape from Wall Street as they consider options between now and Thursday. If stocks drop again as they did without a plan from the nation's capital, the political pressure could become intense this November.