Stocks on Wall Street took a blood bath Monday afternoon after the Treasury Department's proposed aid package for the financial sector failed to pass the House of Representatives.
The Dow Jones Industrial Average, which fell as much as 705 points, was lately down 448 points to 10,695, and the S&P 500 lost 66 points to 1147. The Nasdaq plummeted 134 points to 2050. The Dow was taking swings of more than 100 points in the minutes immediately following the vote.
The $700 billion proposal, formally presented last week by Treasury Secretary Henry Paulson, failed to garner sufficient votes to make it through the House of Representatives. The package, which would have set up a facility to use government money to buy troubled assets from financial firms, was voted down with an initial tally of 206 votes for the bill to 227 against. The controversial piece of legislation had earlier been expected to make it through. A total of 218 votes were required to pass the bill.
The sharp decline in the major indices is "strictly in response to Congress not passing the TARP," said Michael Strauss, chief economist and strategist at Commonfund. "The question is, are they going to get back together and try to get something through?" Strauss said the general expectation is that Congress will have to reconvene and try to pass some legislation to help the credit markets."This is a wholesale dumping of stocks," said Robert Pavlik, chief investment officer with Oaktree Asset Management. "The Street is trying to indirectly send a message that if this thing doesn't get passed, you'll be faced with a wholesale market selloff, anything across the board."