Washington's rejection of the government's plan to stabilise the financial system causes panic in New York.
The US financial system is in a state of near-panic, following Congress' rejection of its government's bank bailout plan.
Yesterday, five banks around the world were bailed out by governments, following a collapse in investor confidence in the financial sector. New York's Dow Jones stock index also endured its biggest one-day drop ever, declining by 777 points.
This is mainly because of the failure of the "bad bank" scheme - backed by president George W Bush, both presidential candidates and the Republican and Democratic leaders of the house - which would have resulted in up to £350 billion being spent on buying up some of financial firms' most toxic assets.
However, around one-third of house Democrats - and a clear majority of house Republicans - voted against the bill. This is primarily because they worried that the taxpayer would be overburdened by the "bad bank".
US treasury secretary, Henry Paulson, indicated after the vote that he would now attempt to get an amended bill passed - and insisted that the adoption of the bad bank law was necessary to stave off further financial turmoil.
This morning in London, the FTSE 100 index dropped three percent, or 146 points. Asian stocks suffered earlier in the morning, with the Japanese Nikkei index closing 4.1 percent down.
