US House defeats$700 bn bailout plan!! Markets all set to crash

Indian markets are all set to touch a year low yet again today as the HOUSE has rejected the bailout plan. There is now a huge fear of a global crash with Fortis, Bradford and Wachovia being the latest victims of the subprime and real estate market crisis and the House defeating the $700 billion plan.

This is not exactly great news for the financial markets worldwide. The $700-billion bailout plan envisaged by the Bush Administration has been defeated on the floor of the house. The 205-228 vote against the plan resulted in stocks crashing in Wall Street. The Dow Jones Industrial Average were down around 500 points as the news broke.

There were 205 in favor of the legislation and 228 against. Among Democrats, 140 voted in favor and 95 against. Among Republicans, 65 voted in favor and 133 against.

WALL Street plummeted by nearly 780 points in its largest one-day drop last night, as proposed American legislation to bail out troubled banks and kick-start the global economy was rejected by the US House of Representatives.

The price of oil slumped and global financial meltdown loomed after the bill pushed by the Bush administration was voted down.

The defeat has come as a "massive setback" for the Bush administration, specifically the Treasury Department, as well as lawmakers who have been working throughout the last week on the legislation in the wake of the collapse of Lehman Brothers Holdings as well as the government's bailout of American International Group Inc. and its takeover of Fannie Mae and Freddie Mac.

A White House spokesman said that President Bush was very disappointed in Monday's House vote that rejected the administration's rescue plan.

Apparently the law makers were very wary of voting for a plan that risked so much of tax payer's money. Especially when the elections are fast approaching.

What the 109-page bill would do is to authorise the government in phases to buy $700 billion of illiquid mortgage assets, mostly from Wall Street financial institutions. The bill also has curbs on executive compensation for executives, equity stake and capital distribution control provisions to protect taxpayers.

Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson have said the plan is necessary to avert serious consequences for markets and the economy.