The proposal to extract toxic debts from the banking system was struck down by 23 votes with 228 no votes to 205 yes votes in the Congressional house.
Despite falls worldwide and the greatest one-day drop -7% – in the history of the Dow Jones share indexes in the UK and France are alive and kicking.
Early morning trading shows the FTSE 100 is up by 0.74%, following a fall of 3% yesterday. France’s Cac 40 index is also showing a tentative rise of 0.06%.
Banking shares in the UK were particularly hard hit yesterday, with HBOS down 12%, Royal Bank of Scotland down 11% and Lloyds TSB seeing a drop of 9%.
President George Bush is due to make a speech in response to the failure of the bill later today.
But Congress will not return to session until Thursday following Rosh Hashana, the celebration of Jewish New Year.