perhaps our salvation is indeed at hand…let us pray.

Source: FT.com

Markets were sent into a tailspin on Monday when the House of Representatives shocked investors by voting to reject the Bush administration’s $700bn (€484bn) bail-out plan.

The vote effectively torpedoed unprecedented government interventions to quell the fear in the financial markets which had earlier seen five US and European banks rescued or nationalised and the world’s central banks unleashing a gigantic global liquidity operation.

House Republicans voted roughly two-to-one against the bail-out, while the Democrats split three-to-two in favour. Congressional leaders took procedural steps that could enable a revote, but analysts said Democrats would be unlikely to try again without the promise of more Republican support.

The S&P 500, already heavily down, plunged at one point by 7.2 per cent on the day before recouping some of its losses. However, as the political recriminations began it was down 6.5 per cent in late afternoon trading. Even before the surprise vote, the FTSE 100 had closed down 5.3 per cent on a tumultuous day which saw financial stocks hammered.

Meanwhile, stress in the credit markets, the epicentre of the financial crisis, intensified as investors fled to save government securities. A flight to safety saw the yield on the two-year US Treasury bill fall 38 basis points.

Each side blamed the other for playing partisan politics. The rescue plan has angered many taxpayers, who see it as a bail-out for Wall Street.

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