Nighmare on Wall Street

Much to the shock of the global investors community, the much anticipated US$700 billion bailout plan was rejected by a 2 to 1 decision in the US Congress meeting yesterday. It immediately brought Wall Street to its worst single day point drop in history, with Dow Jones Industrial crashing by 7% (780 points) overnight!

That means there is still no potential sustainable solution to the prolonged financial and credit crisis currently experienced by the U.S plus its contagious effects experienced particularly in Europe.

So why the bailout plan did not get through?

The defeat of the rescue package represented a perfect collision of the forces of modern politics - a fast-moving Internet campaign, vulnerable incumbents, a weakened and unpopular president, and a roiling presidential campaign.

Based on poll, the American public appears to reject the plan as well. Perhaps, this is one scenario where few people really want to do it, given the presently politically sensitive timing!

The vote also represented an extraordinary rejection of Bush, who personally called wavering lawmakers and delivered a last-ditch public appeal Monday morning, as well as Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke.

Taking public funds to bailout failed financial institutions is indeed unpopular and perhaps against the principles of a free market but given the circumstances, it is perhaps justifiable to save the ship or else everyone may drown!

So it remains to be seen what is in store next. One thing is for sure, credit will be further tightened and more financial institutions and possibly companies (who are deprived credits) will start to fall if the financial crisis is not rectified in a speedy manner.

Yesterday's crash had also effectively wiped off US$1.2 trillion from the market in one day!

Do follow the video below for further reaction to the rejection of the bailout plan.