By the end of trade on Wall Street Monday 29th September the Standard & Poor’s 500 index fell the most since the 1987 crash.  The Dow Jones Industrial Average dropped 778 points, its largest point drop ever and the MSCI World Index, an index of 23 developed markets slid 6.9 percent, the most in 21 years.  All of this the result of US congress failing to agree on a US $700 billion rescue plan to bail out failing financial institutions.

Congressmen voted 228 to 205 to defeat the bailout plan in the US House of Representatives.  This would be the biggest government intervention in markets since the Great Depression.  Treasury Secretary Henry Paulson has said that he is not giving up and he will be working with congress to negotiate a plan that works for everybody.  House Majority Leader Steny Hoyer has said that the House may take up this issue again by the end of the week.

In the mean time the US Federal Reserve will pump another US $630 billion into the financial system through an increase in existing currency swaps and the Term Auction Facility.  The Fed increased its existing currency swaps with foreign central banks by US $330 billion.  The Term Auction Facility, the Fed’s emergency loan program will expand by US $300 billion.  These efforts are designed to inject much needed cash into the banking system increasing investor & consumer confidence.