The shock vote sent world markets reeling, interest rates soaring in interbank markets and commodity prices tumbling, except for gold. US Treasury yields fell sharply as investors sought safety once again.
Three more financial groups failed and needed rescuing, on top of the three that were rescued at the weekend in Europe.
European shares fell to a three and a half year low and US markets were down to 2005 levels as well. It was the largest single points fall for the Dow, exceeding the slump in October, 1987, but not in percentage.
The Dow plunged nearly 700 points when it looked like rejection was likely, but recovered 200 points as the arm-twisting continued, to no avail.
Australian market is poised to plunge more than 300 points at the opening.
The Dow fell 400 points in four minutes as investors panicked as they saw the vote failing.
But after defeat was confirmed, (228-205 vote), the Dow plummeted 472 points (4.24%) to 10,670.
The markets the steadied briefly, but in late trading returned to the slope and skidded past 700 points... the Dow finished down 770 points, or 6.92%, the S&P 500 fell 8.74% or more than 95 points. Nasdaq was off more than 9%.
Financial stocks on Wall Street were battered lower. European financial stocks were equally damaged. the Dexia bank, a French-Belgian group, became the latest group to be rescued, the fifth in two days. In the US Wachovia was taken over by Citigroup, with US Government help.
Central banks around the world prepared to inject another $US330 billion in a series of swap deals, involving Australia as well. That was on top of the $US290 billion revealed last week.
Australian market will be down more than 300 points at the opening today with the ASX200 off more than 330 points in futures trading overnight, or 7%.
Oil fell $US10 a barrel to around $US96 a barrel, gold jumped to $US917 an ounce, up almost $US30 and copper slumped. The US dollar rose, the euro fell and the Australian dollar was weaker, finishing just over 80 US cents..
It was an incredible day never seen before by anyone of this generation.
The nationalisation of Bradford & Bingley in the UK and the rescues of Fortis, the Belgo-Dutch banking and insurance group, and Hypo Real Estate, one of Europe's leading property groups, overshadowed the US bailout plan.
Later in the day the Icelandic Government took over Glitnir, the country's third largest bank which had expanded via short term borrowings.
And the Belgium Government and its regions have agreed to rescue the Dexia bank, a financial group with big funds management operations in Australia. It's shares plunged 30% overnight. Dexia is a French-Belgium bank and was the 5th European financial group rescued in the space of a couple of days.
And as the debate in the US Congress unfolded, Wachovia, the country's sixth-largest lender, was rescued by Citigroup, with the US government take a $US12billion stake in the country's largest bank.
The German government bailout of Hypo Real Estate will cost an incredible €35billion, or around $US55 billion.
The US bailout was effectively sliced in half to $US350 billion and a trio of financial problems in Europe over the weekend shook confidence in Asia, Europe and Australia yesterday.
Bank shares were weak across most regions: Westpac fell 3.5% in Australia, Dexia in Luxembourg fell 20% and then 30% on news its government was helping bailout Fortis and on fears, larter confirmed, about its troubles..
Markets in Japan and Hong Kong fell: in Tokyo, the Nikkei lost 1.3% and the Hang Seng index shed 4.3%.
Banks in Europe were weak with Dexia's slump and those of other banks caused a knock on effect: Germany's Commerzbank fell 25% and ING shed 18.2%.The Royal bank of Scotland, Fortis' partner in the ABN Amro takeover, fell nearly 13%..
Hypo Real Estate slumped a massive 73% after it was bailed out by its competitors after stumbling close to collapse over the weekend.
The Australian stock market closed almost 2% lower after losses in the resources sector and as investors awaited the outcome of a vote by US lawmakers on a $US700 billion ($840 billion) bailout of US financial firms proposed by the US government.
World markets were very toey yesterday as they awaited the US vote.
The failures and rescues in Europe were signs of growing distress, which had bankers and others increasingly worried.
At the local close, the ASX200 index was 97.4 points, or 2%, lower at 4807.4, while the All Ordinaries had dropped 95.4 points, or 1.9%, to 4839.2.
BHP Billiton fell $1.60, or 4.5%, to $34.24, Rio Tinto lost $5.50, or 5.5%, to a 13-month low of $95.50 while Fortescue Metals shed 38 cents, or 6.4%, to $5.60.
The Australian market had opened almost 1% higher after reports said an agreement had been reached for the US government's proposed bailout.
In banking the ANZ fell 21 cents to $18.79, the Commonwealth shed 56 cents to $43.87, the National Australia Bank 11 cents to $25.69 and Westpac losing 83 cents to $23.15.
Retailers were mixed, with Woolworths gaining 27 cents to $28.37, Coles' owner Wesfarmers retreating 87 cents to $28.41, David Jones losing 13 cents to $4.40 and Harvey Norman steady at $3.50.
Agribusiness Futuris Corporation dipped half a cent to $1.485. The company today said it had appointed former Coates Hire boss Malcolm Jackman as its new chief executive.
OneSteel dropped 40 cents, or 7.5%, to $4.92 after it launched a $145 million takeover for the shares in New Zealand-based Steel & Tube Holdings it does not already own.
