Stocks plunged in Asia in early trading Tuesday, one day after a key U.S. stock market index posted the worst one-day point decline in its history amid continued concern over the U.S. financial crisis.
The key indices in Tokyo and Sydney, the Nikkei and the S&P/ASX 200, each shed about five percent this Tuesday morning.
On Monday, the House of Representatives rejected a massive government rescue plan for America’s troubled financial institutions. Hours later, the Dow Jones Industrial Average was down a record 778 points (seven percent) as trading finished for the day while other stock indexes also fell dramatically (around nine percent).
The bill’s rejection came despite warnings from the president and Congressional leaders that a “no” vote might throw the United States into economic turmoil.
President George Bush says he will meet with his top economic advisors and members of Congress to determine what to do next. Treasury Secretary Henry Paulson says he will use all the tools at his disposal to protect the financial markets.
The rejected bill received the backing of most House Democrats but only about one-third of House Republicans.
Democratic and Republican party leaders blamed each other for the bill’s defeat, but said they would try to work with each other on a new plan.
The administration proposal that failed would have allowed the U.S. Treasury to spend up to $700 billion to buy bad investments from financial firms. Those bad investments have made banks reluctant to lend money to businesses and consumers.
Mr. Bush said the proposal addressed the bad home loans that are at the center of the financial crisis. Members of Congress had added limits on compensation to executives of rescued companies, and a requirement for the government to try to keep homeowners from losing their homes.
Before the vote, central banks were working to stabilize markets. On Monday the U.S. Federal Reserve made an additional $330 billion available to other central banks. Officials hope the cash will encourage financial institutions to continue making loans available.
Some information for this report was provided by AFP, AP, Bloomberg and Reuters.
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