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Bush battles to rescue controversial bailout

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WASHINGTON

House leaders point fingers as global markets plummet

AFP

A man holds a sign Monday outside the New York Stock Exchange as the Dow Jones Industrial Average sank 770.59 points (6.92 percent) to 10,372.54 after the closing bell in its worst single-day point decline ever.

PRESIDENT George W Bush battled Tuesday to save his US$700 billion bailout of the US financial system after the House of Representatives rejected the plan, sending global stocks into a tailspin.

Bush, who was to make a statement on the plan at 6:45pm Cambodia time, said he was "disappointed" that the bailout had foundered, while Democrats accused conservative Republicans of killing the bill for ideological reasons.

The president immediately summoned top advisers to tackle the latest crisis "head on," and Treasury Secretary Henry Paulson hurried to the White House for talks after the vote was rejected.

Paulson said he was committed "to use all the tools available to protect our financial system and our economy," adding: "Our tool kit is substantial but insufficient."

He vowed to work with Congress "to pass a comprehensive plan to stabilise our financial system," and acknowledged that "we've got much work to do. This is much too important to simply let fail."

Shockwaves reverberated through the presidential race just five weeks before the November 4 general election, and a blame game erupted between Republicans and Democrats.

Amid panic selling on Wall Street, the Dow Jones Industrial Average plunged 777.68 points (6.98 percent), its largest point drop recorded. Asian and European stocks fell heavily on Tuesday.

In tense scenes rarely seen on the House floor, Republican conservatives and rebel Democrats combined to doom the bill by 228 votes to 205, after Bush had pleaded for its passage.

House speaker Nancy Pelosi pledged to go back to work to pass a new bill.

But her number two Steny Hoyer said the House would not meet until Thursday as many members had gone home for the Jewish holiday, Rosh Hashanah.

"However, whether the House will consider legislation regarding the economic crisis has not been determined," Hoyer said.

The 15-minute vote was kept open for 40 minutes as Democratic and Republican leaders made desperate attempts to twist the arms of lawmakers who voted no.

Republican rift

A senior Democrat said Republicans had reneged on a pledge to get 50 percent of their caucus plus one to vote for the bailout, pointing out that 60 percent of Democrats backed the plan.

Leading Democrat David Obey bitterly said that the Republican leadership, "have lost total control over their own party."

"Some of those guys would rather lose an economy than lose an election."

House Republican Leader John Boehner blamed what he called a partisan speech to the House by Pelosi.

"I don't know that we know the path forward from this point. We need everybody to calm down and relax and get back to work," he said.

But Barney Frank, the top House Democrat in charge of negotiating the bill, dismissed criticism of Pelosi's speech as pure "pettiness" and said Republicans were trying to cover their embarrassment over the split party. AFP

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