The House of Representatives this afternoon(SA time)rejected the Bush administration’s proposed $700 billion rescue package for the financial sector, triggering a massive sell off in stocks and a rush into safe-haven government bonds.
The voting was 225 against vs 208 for.
The result was a sliding Dow Jones and all other US indices which in turn affected all other equity markets which were open for trade.
The Fed seems to not have the ability in its balance sheet to help its banking system on its own, but congress was worried that this emergency rescue package would hold long term consequences for the US economy if passed in its current form.
Will we see a reworked plan in the next few days? Until a solution is found, markets will continue to reflect the high level of uncertainty which it dislikes so strongly.