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President Bush said Tuesday he was "disappointed" by the House's rejection of the $700 billion bailout plan and urged Congress to take action to save the economy.
"Unfortunately, the measure was defeated by a narrow margin," Bush said in a brief televised address at the White House. "I'm disappointed by the outcome, but I assure our citizens, and citizens around the world, that this is not the end of the legislative process."
Bush said he expects lawmakers to move forward with legislation. The House is adjourned for the Jewish holiday Rosh Hashanah and is not scheduled to return to session until Thursday at noon. The Senate is in session on Tuesday.
Senate Majority Leader Harry Reid, D-Nev., said that he would meet with some key Democratic senators - including Senate Banking Committee Chairman Christopher Dodd, D-Conn. - working on a bailout plan.
For his part, Bush said the nation is facing "the real prospect of economic hardship."
"Our economy is depending on decisive action from the government," Bush said. "The sooner we address the problem, the sooner we can get back on the path of growth and job creation. This is what elected leaders owe the American people, and I am confident that we'll deliver."
Bush is meeting with his team Tuesday morning to review options, a senior Bush administration official told CNN. On Monday night, White House staffers were in contact with Republican congressional leaders and Democratic staffers, the official said.
The official said that even Republicans who oppose the plan understand the seriousness of the situation and "want to get this done."
The Senate's lead Republican, Sen. Mitch McConnell, R-Ky., said Tuesday that lawmakers will pass a bill. "I want to reassure the American people that we intend to pass this legislation this week," he said.
On Tuesday, Bush spoke to Sens. Barack Obama and John McCain about the financial crisis, according White House spokesman Tony Fratto. The presidential candidates "offered ideas and reaffirmed what they have said publicly - that this is a critical issue that needs to be addressed," Fratto said.
Stock market reaction
The bailout package, a collaboration of Treasury Secretary Henry Paulson and leaders from both parties, was rejected by the House in a 228-205 vote Monday. Two-thirds of Republicans and about one-third of Democrats voted against the bill.
Following the defeat, the Dow Jones industrial average dropped 777 points, its biggest one-day point decline ever. The decline of nearly 7% was the largest percentage decline since the Black Monday crash of 1987.
The bill, if approved, would have allowed the federal government to buy troubled mortgage-related investments from finance companies, freeing them up for lending, to pull the economy out of its credit freeze. Proponents of the bill believe it would prevent the United States from sliding into a serious financial crisis, but opponents saw it as an unbearable burden to taxpayers and a rescue for Wall Street.
"That, no question, is a large amount of money," said Bush, referring to the $700 billion. "We're also dealing with a large problem. But to put that in perspective, the drop in the stock market yesterday represented more than a trillion dollars in losses."
A closely watched index released Tuesday showed home prices tumbling by the sharpest annual rate ever in July, but the rate of monthly declines is slowing.
The Standard & Poor's/Case-Shiller 20-city housing index fell a record 16.3% in July from a year earlier, the largest drop since its inception in 2000. The 10-city index plunged 17.5%, the biggest decline in its 21-year history.
No price gains
Prices in the 20-city index have plummeted nearly 20% since peaking in July 2006. The 10-city index has fallen more than 21% since its peak in June 2006.
No city in the Case-Shiller 20-city index saw annual price gains in July, the fourth straight month that has happened.
However, the pace of monthly declines is slowing, a possible silver lining. Between May and July, for example, home prices fell at a cumulative rate of 2.2% - less than half the cumulative rate experienced between February and April.
But there's "no evidence of a bottom," said David M. Blitzer, chairman of the index committee at S&P.
Trouble in Vegas
Las Vegas prices plunged the most at nearly 30%, with Phoenix diving 29% and Miami 28%. Prices in the seven cities in the Sunbelt all fell between 20% and 30% from a year ago.
Only seven cities showed positive or flat returns from June to July, down from nine that showed month-over-month gains in June. Atlanta, Boston, Dallas, Denver and Minneapolis all posted positive returns for three months or more.
Oil prices fell to near $103 a barrel Monday on concern that economic growth will slow across the globe despite a tentative agreement in Washington on a $700 billion bailout package to stabilize the U.S. financial system.
By midday in Europe, light, sweet crude for November delivery was down $3.50 to $103.39 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.13 Friday to settle at $106.89.
In London, November Brent crude fell $3.39 to $100.15 a barrel on the ICE Futures exchange.
Bailout plan goes to House
Congressional leaders and the White House agreed Sunday to a rescue of the ailing financial industry after lawmakers insisted on sharing spending controls with the Bush administration. The biggest U.S. bailout in history won the tentative support of both presidential candidates and goes to the House of Representatives for a vote Monday.
"The bailout package reduces the chance of a complete meltdown," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "But worries on the demand side will continue to weigh on oil prices."
The plan would give the administration broad power to use hundreds of billions of taxpayer dollars to purchase devalued mortgage-related assets held by cash-starved financial firms.
Congress insisted on a stronger hand in controlling the money than the White House had wanted. The government would take over huge amounts of devalued assets from beleaguered financial companies in hopes of unlocking frozen credit.
"It's still a crisis situation," Shum said. "The market is concerned about the depth and breadth of this global downturn."
JBC Energy in Vienna, Austria, also was cautious about the effects the rescue package could have on U.S. economic growth.
"The latest government reports show sales of new homes at a 17-year low in August and orders for durable goods falling stronger than expected," JBC said in a research note. "It is far from certain that (the bailout) will prevent an economic downturn."
Dollar stronger
Prices were also pushed down by a stronger dollar. Investors often buy crude futures as a hedge against a weakening dollar and inflation, and sell when the dollar strengthens.
While the dollar gained as details of the bailout package become known, analysts said the euro was weaker also because of growing economic problems in Europe.
"It is also a question of the euro losing ground due to a continued deterioration in the euro zone," said Olivier Jakob of Petromatrix in Switzerland. "With the rate of bank failures increasing in Europe and the economy slowing more rapidly than expected, pressure will continue to mount on the (European Central Bank) to lower (interest) rates."
The 15-nation euro fell Monday to $1.4361 from $1.4614 on Friday while the dollar rose to 106.23 yen from 106.01.
"The bailout should inject confidence in the markets in the short-term," Shum said. "Longer term, it increases money supply, inflation and likely weakens the dollar - all of which supports oil prices."
