WASHINGTON DC, USA (AFP) - The US House of Representatives yesterday dramatically rejected a $700-billion Wall Street bailout, sending stocks crashing to their worst single day loss ever and deepening the US financial crisis.

NEW YORK, USA - Trader David O'Day rubs his eyes as he works on the floor of the New York Stock Exchange, yesterday. Fear swept across the financial markets yesterday, sending the Dow Jones industrials down as much as 705 points, after the government's financial bailout package failed in the House. (Photo: AP)

As a palpable sense of fear ricocheted through Washington, President George W Bush said he was "disappointed" that the bailout foundered, as Democrats accused Republican conservatives of killing the bill for ideological reasons.

The president immediately summoned top advisers to tackle the latest crisis "head on", and Treasury Secretary Henry Paulson was seen hurrying into the West Wing of the White House.

Early this morning (Tuesday), Japan's stocks plunged toward a four-year low after the US bank-rescue package was rejected, deepening concern that the global credit turmoil will worsen.

Amid panic selling on Wall Street, yesterday, the Dow Jones Industrial Average plunged 777.68 votes (6.98 per cent) and the Nasdaq crashed 199.61 points (9.14 per cent) to 1,983.73, its lowest since 2005.

In scenes of suspense, tension and shock rarely seen on the House floor, Republican foes of the bill and rebel Democrats combined to doom the bill by 228 votes to 205, after Bush had pleaded for its passage.

House speaker Nancy Pelosi pledged to go back to work to pass a new bill, but a senior Democratic lawmaker said nothing would happen until at least Thursday as many members had gone home for the Jewish holiday of Rosh Hashanah.

The 15-minute vote was kept open for 40 minutes as Democratic and Republican leaders made desperate attempts to twist arms of lawmakers who voted no.

The shockwaves from Wall Street's day of carnage rippled out across America yesterday, heightening anxiety amongst bewildered investors and raising fears the worst is yet to come.

From coast-to-coast, Americans voiced concern at the latest barrage of gloomy news that has left the nation reeling under its most devastating financial crisis since the Great Depression.

For many, the collapse of the US$700-billion bailout and the record one-day fall on the stock exchange reflected a failure of leadership on Wall Street and in Washington.

Several said they had increasingly lost faith in the financial system, and they were now questioning if any institution could truly be regarded as a save haven in the current tumultuous climate.

"You wonder how big this thing is going to be," said Robert Gluck, a 36-year-old film editor watching CNN on a television on Sunset Boulevard in Los Angeles. "It seems that it's getting worse, and the scary part is that no-one seems to know what to do or when it's all going to bottom out."

Lisa Raynor, a 32-year-old human resources executive, said she and her husband had watched in dismay as their stock portfolio had shrunk.

"Our investment portfolio has suffered a lot, but we're not sure about where to move our money," Raynor told AFP. "It's hard to know who to trust."

Robert Lanese, a retired hairdresser, said the turmoil was the result of failed Republican policies, and gloomily predicted that more companies would go to the the wall.

"More banks will go, more people will lose their jobs, it will go on like that for a while, whatever happens tomorrow," he told AFP.

"The Democrats will sweep in and must bring changes, in the financial system, in the way the economy works. These are sad days for the world, and sad days especially for America".

One senior Democrat said Republicans had reneged on a pledge to get 50 per cent of their caucus plus one member to vote for the bailout, pointing out that 60 per cent of Democrats backed the plan.

Leading Democrat David Obey reacted bitterly, saying Republican leadership, including the president and Republican presidential nominee John McCain, "have lost total control over their own party."

"Evidently some of those guys would rather lose an economy than lose an election."

Democratic White House hopeful Barack Obama meanwhile appealed for calm, seeking to stablise global markets and show composure-in-a-crisis leadership credentials.

"I'm confident that we're going to get there but it's going to be a little rocky," he said in Colorado.

"It's important for the markets to stay calm because things are never smooth in Congress and to understand that it will get done," Obama said.

There was no immediate reaction from McCain, who had boasted that he had helped bring the rebel Republicans along to vote for the deal.

The bill would have immediately released US$250 billion to enable the government to buy up troubled assets, and sets a ceiling for all purchases of US$700 billion.

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