3:10PM New York – The U.S. House rejects $700 billion bailout plan. Dow plunges 5% and the Nasdaq index drops 8%.

The U.S. House rejected the controversial bailout plan proposed by the Treasury Secretary and supported by the Fed Chairman. Leadership of both houses pushed hard to convince the members of the House and President Bush expressed his support.

The U.S. House rejected the bailout plan by a vote of 228 to 205. The proposal would have widely expanded the Treasury Office powers and given a near unlimited authority and no oversight to spend $700 billion.

Dow Jones Industrial Average fell 542 to 10,605, Nasdaq declined 146.56 to 2,036.67 and S&P 500 index plunged 76.60 to 1,136.07 in heavy trading on both the exchanges.

President Bush said after the vote that he was ‘disappointed.’ The House Financial Services Committee Chairman Barney Frank said, “I am very disappointed” and was quick to blame Republicans.

President Bush, widely unpopular was criticized by his own party members who voted against the proposal as they fear that the country is slipping into socialism if the plan is approved. The $700 billion price tag angered many members and the lack of oversight and checks on the authority of the Treasury generated the heated debate. Members of the House feel that the current plan does not solve the root cause of the credit crisis, the weakness in the housing market.

The plan is viewed as nothing but a bailout of the rich on Wall Street. The voters were shocked and angry that the leadership of both parties will work so hard to devise a plan that bails out the excessive greed on Wall Street, irresponsible lending by banks and reckless behavior by borrowers.