House Rejects Financial Rescue, Sending Stocks Plummeting

In the thick of the presidential campaign, the collapse of the deal left Washington buzzing with recriminations. Republicans -- from Sen. John McCain's top economic aide to the House GOP leadership -- initially blamed Pelosi, saying her floor speech castigating Bush administration "policies built on budgetary recklessness, on an anything-goes mentality, with no regulation, no supervision, and no discipline in the system" poisoned the atmosphere and invited partisan retribution.

In truth, few Republicans were on the floor to hear that speech, and those who were there showed no signs of discomfort, as they often do. Republican leaders backed away within hours, conceding they never had the votes they had promised.

Democrats found strength in numbers, saying nearly two-thirds of their members voted for the bill. If anyone is to blame for a record sell-off on Wall Street, Democrats said, it was the party that provided just 65 votes.

Nowhere were the recriminations fiercer than on the presidential campaign trail. McCain, the GOP nominee, had been prepared to claim credit for the measure's passage, attributing it to his decision to suspend his campaign last week and engage in negotiations.

"I've never been afraid of stepping in to solve problems for the American people, and I'm not going to stop now," he said at a rally in Columbus, Ohio. "Senator Obama took a very different approach to the crisis our country faced," he said of his opponent, Sen. Barack Obama. "At first he didn't want to get involved. Then he was monitoring the situation."

When two-thirds of the House Republican Conference voted no, the McCain camp changed its pitch. Not a single member of McCain's home-state Arizona House delegation voted for the bill.

"Just before the vote, when the outcome was still in doubt, Speaker Pelosi gave a strongly worded partisan speech and poisoned the outcome. This bill failed because Barack Obama and the Democrats put politics ahead of country," said Douglas Holtz-Eakin, McCain's senior domestic policy adviser.

Obama campaign aides gleefully shared a quote from McCain's chief political strategist, Steve Schmidt, who said Sunday on NBC's "Meet the Press": "What Senator McCain was able to do was to help bring all of the parties to the table, including the House Republicans, whose votes were needed to pass this."

Obama delayed a campaign event in Westminster, Colo., to speak to Paulson and Pelosi, then told his audience: "One of the messages I have to Congress is, 'Get this done, Democrats; Republicans, step up to the plate.' "

For Bush, the defeat was the starkest sign yet that a president who once had lockstep support among congressional Republicans has all but lost his influence. He has had vetoes overridden, on a water projects bill and a major agriculture measure, but nothing to compare to the defeat of a measure he had said was critical to the nation's economy. In the days before the vote, the president addressed the nation about the urgency of the plan, spoke out daily, even summoned congressional leaders and the two presidential candidates to the White House.

The divisions in both the Republican and Democratic ranks that had bedeviled negotiators simply could not be mended that easily. House Republican leaders acknowledged they let Pelosi put the bill on the floor with at least a dozen Republican votes still needed. But they thought they could win them over, with stock prices falling and time running out.

Conservative Republicans who have been decrying the bailout never wavered in their opposition, nor did liberal Democrats who saw the measure as a rescue plan for Wall Street millionaires. And House members in tough reelection bids abandoned the legislation in droves.

Opponents included the most endangered Democrats, including Reps. Carol Shea-Porter (N.H.), Nick Lampson (Tex.) and Nancy Boyda (Kan.), and the most endangered Republicans, from conservative Marilyn Musgrave (Colo.) to moderate Lincoln Diaz-Balart (Fla.). Democrats Mark Udall (Colo.) and Tom Udall (N.M.), both running for Senate seats, voted no. Low-level members of the Republican leadership, such as Marsha Blackburn (Tenn.) and Thaddeus McCotter (Mich.), defied their senior leaders. African American Democrats with virtually no prospect of defeat voted no en masse.

Still, with the options declining and their members eager to get home to campaign, congressional leaders insisted they would not adjourn for the year without some kind of stabilizing legislation. The shock waves of the House defeat are expected to rock world markets this morning. Already, the carefree attitude that international bankers had been taking has begun to give way, with the European Central Bank moving an extra $173 billion into European markets yesterday.

"What happened today cannot stand," Pelosi said. "We must move forward, and I hope that the markets will take that message."

Staff writers Paul Kane, Anne E. Kornblut, Michael D. Shear and Perry Bacon Jr. contributed to this report.