After failing to pass a bill geared at kick starting the financial system in the United States on Monday, market participants are looking for help from central bankers in the form of rate cuts and a return of the failed bill as early as Thursday.

According to traders, an early morning rally in stocks is attributed to renewed optimism that a second bill will pass and that the global central banks could begin looking at cutting interest rates sooner than later.

Economists from Citigroup wrote in a note to clients that there is a good chance global central banks could make emergency rate cuts to try to stem the impact of the growing financial crisis. "Facing a sharp reaction of financial markets after the rejection of the US rescue package by the House of Representatives yesterday and a further bailout of a Belgium/ French bank overnight, there is a decent chance that European Central Banks (ECB, BoE, SNB, Riksbank and the Danish Central Bank) will make emergency easing soon, perhaps this week, especially if the US Fed is also ready to cut again."

In a dramatic turn of events that sparked a landslide selloff in equity markets on Monday, the U.S. House of Representatives rejected the Emergency Economic Stabilization Act in a final vote of 228 to 205.

CNBC quoted congressional staffers on Monday as saying both sides were "shocked" by the decision and a second vote on the bill will not happen until Thursday at the earliest. "We need time to figure this out," a staffer said.

A follow-up statement from Treasury Secretary Henry Paulson also expressed his disappointment at the failure of the bill to pass. He said he would discuss with Fed Chairman Ben Bernanke, President Bush and congressional leaders ways to move forward.

The treasury secretary also pledged that the Treasury would use all the tools in its arsenal to protect the financial markets.

In a press conference on Tuesday, U.S. President George W. Bush said he was going back to congressional leaders to iron out the kinks in the first plan, and make the modifications necessary to get another bill to Congress as early as Thursday.

"What matters is that we get a law," said Bush. "The U.S. economy is at a critical moment."

In an interview with Bloomberg television, Keith Hennessey, director of the White House National Economic Council, said the executive branch is doing everything in its power to work with congressional leaders on another version of the bill that would pass.

Thus far, there is little indication of what changes will be made to the bill.

By Erik Kevin Franco
©CEP News Ltd. 2008