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Markets mayhem after U.S. bailout failure

  • Story Highlights
  • Investors dump shares after U.S. lawmakers reject a Wall Street bailout plan
  • Asian stock markets expanded losses toward the end of the trading day
  • Europe markets also fall, Russian stock exchange closed as share plummet
  • Bank of Japan pumps another 2 trillion yen ($19.23 billion) into money markets
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(CNN) -- Investors continued to dump shares Tuesday after U.S. lawmakers unexpectedly rejected a Wall Street bailout plan, triggering the largest point drop in U.S. market history.

Stocks in Europe opened sharply lower -- after big losses on Monday -- while many Asian markets fell near the end of the trading day.

The U.S. stock market was down almost 778 points at closing Monday -- just under 7 percent -- the worst single-day point loss ever, topping even the loss following the September 11 terrorist attacks.

The Japan's Nikkei Index closed down 4.12 percent while the Australian Securities Exchange fell 4.32 percent. The Hong Kong exchange dropped 1.4 percent.

The Korea Exchange in Seoul, South Korea, closed down 0.72 percent, after being off more than three percent earlier.

In London, the FTSE 100 Index initially slumped 2.3 percent to 4705.5 -- its lowest point since December 2004 -- before pulling back to 4765.

Russian stock exchanges suspended trading Tuesday morning after shares plummeted, Russia's Interfax news agency reported.

The Russian Trading System said it suspended trading on the RTS equity market until further notice, in compliance with a decision issued by the Federal Financial Markets Service. The MICEX Stock Exchange was already conducting restricted trading on orders from the FFMS, Interfax reported Tuesday.

The Bank of Japan on Tuesday morning pumped another 2 trillion yen ($19.23 billion) into money markets, amid an effort among the world's central banks to calm worries about a global financial crisis, The Associated Press reported.

The Bank of Japan in recent weeks has been injecting trillions of yen by the day to add liquidity into the system. The latest brings the bank's infusion to a total of 20 trillion yen ($192.3 billion), AP reported. Video Watch why the Asian financial system remains resilient »

The latest market turmoil started after U.S. lawmakers in the House of Representatives on Monday voted against the biggest proposed government intervention in the U.S. economy since the Great Depression of 1929.

Government officials, Treasury chiefs and political leaders from both sides of the political divide thought they had agreed Sunday on the details of a $700 billion rescue plan that would prop up the nation's ailing financial system -- and be supported in the House of Representatives. Video Watch a Wall St. veteran tell why he thinks the bailout is vital »

As it became apparent the vote was lost, the Dow Jones plunged.

Monday's plummet knocked out approximately $1.2 trillion in market value, the first post-$1 trillion day ever, according to a drop in the Dow Jones Wilshire 5000, the broadest measure of the stock market. However the 7 percent decline does not rank among the top 10 percentage declines.

Republicans and Democrats blamed each other for the result -- 205 to 228 against the bailout.

President Bush was "very disappointed," his spokesman, Tony Fratto said. Bush will be meeting with his advisors and will be calling congressional leaders, Fratto added.

Treasury Secretary Henry Paulson said he will continue to work with congressional leaders to draft a plan that does pass.

Before the vote, Bush said the plan was of "tremendous importance to all Americans." Bailout explainer: What's in the bill?

The Democratic candidate for U.S. president, Sen. Barack Obama, blasted Congress for not passing a financial rescue package, while the Republican candidate, Sen. John McCain's campaign accused Obama and Democrats of putting "politics ahead of country."

A four-hour debate included impassioned pleas for and against the measure from Democrats and Republicans alike. Even some of those arguing for the legislation were quick to point out problems with it.

But the vote began with both Democratic and Republican leadership telling their members the only way to protect the economy from a spreading credit crunch was to vote for the difficult to swallow measure.


After the defeat, Republican leaders accused Nancy Pelosi, the Democratic speaker of the House, of giving a partisan speech which "poisoned" Republican support. Video Watch Republicans lay the blame at Democratic feet »

Pelosi said the $700 billion "is a number that is staggering, but tells us only the costs of the Bush administration's failed economic policies."

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