Pressure arrived from all sides - fearful investors on an already battered Wall Street, foreign leaders and President George W. Bush. Mr Bush told Americans yesterday that the damage to the United States will be 'painful and lasting' if Congress failed to pass a rescue Bill.

He said that the 'economy is depending on decisive action from the government. The sooner we address the problem, the sooner we can get back on the path of growth and job creation'.

He vowed to push to get legislation moving again when Congress reconvenes tomorrow after the Jewish holiday, Rosh Hashanah.

Hopes that a rescue package would eventually be sealed sent Wall Street higher in opening trade yesterday. At 1 am Singapore time, the Dow was 288.16 points higher at 10,653.61.

Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell called for an end to partisan bickering. 'We will get the job done. We'll get it done this week,' Mr McConnell said.

Mr Paulson, the bailout plan's architect, said: 'We need to work as quickly as possible...we have significant tools in our toolkit but they're not sufficient. And so we're going to continue to work with what we have until we get from Congress what we need.'

But lawmakers will not have a lot of room to negotiate.

They need to tweak the legislation enough to win over reluctant Republicans but that risks losing Democrat votes.

If a bailout does not pass, the Federal Reserve and Treasury will have little choice but to return to their strategy of the past 14 months: making case-by-case decisions about individual firms.

But Mr Paulson and independent economists have warned that this ad hoc approach leaves investors unsure about which firms the government will save and which will be allowed to fail. It also does not relieve the financial system of its vast toxic mortgage assets.

The fallout from Monday's House of Representatives vote - 228 to 205 - was immense. Wall Street was the first and most dramatic casualty, suffering its largest plunge in percentage terms since the last Black Monday on Oct 19, 1987.

Its 777-point drop was also its largest ever single-day points plunge and erased more than US$1 trillion (S$1.4 trillion) in market value.

Markets from London to Sydney followed to various degrees. Asian bourses finished flat, with the Straits Times Index down just 0.1 per cent.

But the already tight credit markets locked up even more with interest rates for interbank lending going through the roof as banks shied away from dealing with one another.

Rates hit 7 per cent in the US, well over the official level of 2 per cent.

Gold shot up 1 per cent to US$914 per ounce in New York, oil went below US$96 a barrel while the Singapore dollar rose 0.1 per cent to $1.4327 against the US dollar.

The plan's failure stunned observers. Both Democrat and Republican party leaders had endorsed the Bill - hammered out last weekend - warning that Wall Street's woes were about to affect the pocketbooks of ordinary Americans.

The drama was palpable in the House. As the 'no' votes were outpacing the 'ayes', a leading Democrat began to circle the chamber repeating: 'The market is falling. The market is falling.'

Lawmakers said deep hostility to the plan from constituents just five weeks before elections was a key reason for the defeat.

For some, the plan's collapse reflected a failure of leadership on Wall Street and in Washington.

The scale of the stock market carnage shocked investors.

New York investment strategist Edward Yardeni received a series of terse e-mail messages from clients and friends. 'Is this the end of the world?' one asked.

It certainly felt like it at some points yesterday and governments in the region responded in that tone.

Australian Prime Minister Kevin Rudd urged US lawmakers to pass a rescue package and pledged to provide liquidity and take 'whatever action is necessary' to ensure stability.

Hong Kong's central bank said that it will provide more liquidity to banks for six months. South Korea, Taiwan and Indonesia placed temporary bans on short- selling, while Hong Kong said it will take 'more aggressive' measures against it.

The Monetary Authority of Singapore (MAS) said yesterday that it had injected liquidity into the market and stood ready to make more ready, if needed.

By the afternoon, governments in Europe began to weigh in.

Ireland gave a blanket guarantee for savings held by its six local banks, covering up to ¥400 billion (S$808 billion) in liabilities - a major factor that calmed European share markets.

President Nicolas Sarkozy met French bank chiefs yesterday and said new measures to combat the crisis will be announced in the coming days.

With the central banks pumping in massive amounts of liquidity, the scale of the losses and the mood of investors was nowhere near as dire as in the 1987 crash.

But Microsoft chief executive Steve Ballmer said that no company was immune: 'Financial issues are going to affect both business spending and consumer spending, particularly...spending by the financial services industry.'

Standard Chartered's chief economist in London, Mr Gerard Lyons, said: 'We do not rule out a US recession being deep and long and having a severe global impact. We need to take a deep breath and think about what is happening.'

NEW YORK TIMES, BLOOMBERG, REUTERS, WASHINGTON POST