After several days of deliberation, a majority of U.S. House representatives voted to reject the Emergency Economic Stabilization Act of 2008 in a final vote of 228 to 205.
Although many U.S. officials agreed on the necessity of the plan, which was seen by many as a bailout of Wall Street, Republicans and Democrats sought to put additional provisions in the bill geared at protecting the taxpayer and limiting CEO compensation for firms participating in the program.
Earlier last week, House and Senate Democrats had announced that a deal had been nearly concluded, but the claim was refuted as Republican lawmakers demanded additional provisions.
It has been suggested that members from both parties attempted to use the bill as fodder for the presidential campaign, with both candidates Barack Obama and John McCain returning to Washington, D.C. to participate in a meeting with President George W. Bush.
The news comes on the heels of a string of bad news for U.S. financial markets, with the Federal Deposit Insurance Corporation seizing Washington Mutual and selling most of its assets to JPMorgan Chase on Friday, followed by the acquisition of Wachovia and subsequent sale to Citigroup on Monday.
In recent weeks, the Fed agreed to an $85 billion loan to American International Group, but allowed Lehman Brothers to file bankruptcy and subsequently be sold to Barclays PLC.
The impact of the turmoil has also reached as far as Europe with Fortis Bank in the Benelux, Hypo Real Estate Bank in Germany and Bradford & Bingley in the UK all receiving government funds on Monday.
U.S. equity markets wavered as the vote teetered between positive and negative but with less than a minute to go in voting, when it appeared the nays would take the vote, the S&P 500 fell nearly 2%. As the final votes were being counted, the S&P 500 was down 77 points to 1135. It was at 1170 beforehand.
By Erik Kevin Franco
©CEP News Ltd. 2008