Bail-out collapses under pressure from voters

America's financial system sank further into chaos last night, and stock markets in the Far East fell sharply this morning, after Congress rejected the $700bn bail-out plan supported by President Bush. Facing overwhelming hostility from voters, the House of Representatives balked at providing the money for which Wall Street is begging.

If the bill fails to pass in another vote, likely to occur on Thursday, the US government will have to scramble for other means to save the credit markets. Roughly one-third of Democratic Congressmen and two-thirds of Republicans voted against the emergency bill which would have allowed the US Treasury to buy much of the bad debt clogging America's financial plumbing. The final vote was a decisive 228 to 205.

It came after a day of banking turmoil. Wachovia, America's fourth largest bank, was bought by Citigroup. In Britain, Bradford &

Bingley was nationalised. And in Europe, Fortis had to be rescued with the injection of €11.2bn of taxpayers' money. Banking shares have plunged as a result.

With every member of the House of Representatives facing re-election in November, it was a rotten time to be calling for bi-partisanship and political courage. On the right, voters feel government has no business intervening in free markets, however bad the situation. And on both the left and right, people are furious at what appears to be a golden lifeboat for overpaid Wall Street bankers.

The failure of the bill to pass prompted the largest one-day point drop, 778, in the history of the Dow Jones index. Early today, the global fall-out began, with indexes from Tokyo to Mumbai falling sharply. In London, the City is braced for a heavy drop in the FTSE following yesterday's fall of 5.3 per cent.

Investors fear that the breakdown of the credit markets will have a devastating effect on the economy, hindering business growth and forcing consumers to stop spending. John McCain emerged especially bloodied from