U.S. Treasury Secretary Henry Paulson lost his game of chicken with Congress yesterday. Despite warnings from Federal Reserve Chairman Ben Bernanke, the Congressional Budget Office, and President George W. Bush, the U.S. House of Representatives narrowly rejected a much-altered $700-billion proposal that would have given Treasury wide latitude to purchase toxic mortgage-backed securities with the intention of unclogging the credit markets.
Even as the Dow Industrial Average and other indices plunged, Congressional leaders could not save the bill. The Dow eventually settled at 10365.45, down 777.68 points or nearly seven percent from 1143.1 on September 26. The NASDAQ declined 9.1 percent to 1983.73; the S&P 500 swooned 8.8 percent to 1106.42.