WASHINGTON — After three hours of contentious debate, the House unexpectedly rejected a bill — 228 to 205 — that would create a government facility to buy troubled assets from banks.

After House and Senate leaders finalized a deal on Sunday, passage had appeared all but certain. But a revolt from rank-and-file members grew, scuttling the legislation — at least for now.

House leaders held the vote open after time expired, aiming to convince some members to change their vote. But that effort failed and the measure was defeated. The Dow Jones Industrial Average was down 700 points during the voting and is currently off nearly 500 points.

The failure to pass the bill followed dozens of hours of tense negotiations over the last week between Treasury Secretary Henry Paulson and congressional leaders that concluded with a bipartisan compromise.

The loss came despite passionate pleas from President Bush, Speaker Nancy Pelosi, and House Minority Leader John Boehner to pass the legislation.

Rep. Pelosi recounted the situation that Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke laid out Sept. 18 when they pitched the proposal.

"They described a very, very dismal situation … The fragility of our economy," she said on the House floor. "It just comes down to one simple thing; they have described a precipice we have to pull ourselves back from the brink of."

Rep. Boehner urged members not to vote for their party, or for their reelections, but to do the right thing for the American people.

"You all know how awful this is … I didn't come here to votes for bills like this," he said. "These are the votes that your constituents sent you here to decide on their behalf … they never said it was going to be easy. These are the kinds of votes where you have to look into your soul and decide what is in the best interest of this country."

The bill’s fate is uncertain. Senate lawmakers had been expected to take up the measure on Wednesday. It was unclear if House leaders would change the bill to win more support and try again later in the week, or give up.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.