In a stunning development, the House of Representatives voted down the $700 billion financial bailout plan by a 228-205 margin after working days to hash out an agreement. Two-thirds of Republicans and one-third of Democrats voted against the measure.
The defeat shocked the world, following pledges by leaders of both parties to work together to avert economic disaster. Markets in the U.S. and abroad reacted with alarm. The Dow plunged 778 points, its largest one-day point drop ever, while Japan's Nikkei lost 4%, Australia's markets fell 4.3% and Taiwan's stocks retreated 3.6%.
It was unclear how Congress would proceed with the legislation.
Earlier in the day, Citibank agreed to buy Wachovia bank's assets for $2.2 billion in an FDIC-arranged deal, while Lehman Brothers sold its Neuberger Berman investment management unit to a pair of private-equity firms for $2.15 billion.
Additionally, a federal grand jury launched an investigation into accounting and disclosure issues at Fannie Mae and Freddie Mac, the mortgage finance giants that were taken over by the government earlier this month.NEXT: Tuesday, Sept. 30 - Rebound