WASHINGTON - THE US House of Representatives on Monday dramatically rejected a US$700 billion Wall Street bailout, sending stocks crashing to one of their worst single day losses ever and deepening the US financial crisis.

As a palpable sense of fear ricocheted through Washington, President George W. Bush said he was 'disappointed' that the bailout foundered, as Democrats accused conservative Republicans of killing the bill for ideological reasons.

The president immediately summoned top advisers to tackle the latest crisis 'head on', and Treasury Secretary Henry Paulson was seen hurrying into the West Wing of the White House.

Amid panic selling on Wall Street, the Dow Jones Industrial Average plunged 777.68 points (6.98 per cent) and the Nasdaq crashed 199.61 points (9.14 per cent) to 1,983.73, its lowest since 2005.

And there were signs the contagion was spreading worldwide as Hong Kong share prices opened down 5.6 per cent on Tuesday and Japanese shares prices were down 4.64 per cent by the lunch break in reaction to the House vote.

Japan leaders hope for US action on bailout
Japan's economic ministers voiced hope on Tuesday that the United States would take action to halt the Wall Street meltdown, saying lawmakers' rejection of a bailout was hitting the global economy.

The ministers voiced surprise after the House of Representatives shot down the US$700 billion (S$1 trillion) rescue plan for Wall Street, sending stock markets plunging around the world.

The financial woes 'will likely greatly affect the world economy, and we hope that the US will reach an appropriate conclusion on the solution,' Kaoru Yosano, the minister for economic and fiscal policy, told reporters.

Finance Minister Shoichi Nakagawa separately called on Japanese markets to be calm, saying that Japan's financial sector was in better shape than US and European banks ravaged by high-risk subprime loans.

EU's Mandelson lashes US lawmakers for rejecting plan
Meanwhile, US lawmakers were described as having 'taken leave of their senses' by rejecting the US$700 billion financial bailout plan, European Union Trade Commissioner Peter Mandelson said on Monday.

'I feel they've taken leave of their senses and I hope that in Europe we will not see politicians and parliamentarians replicating the sort of irresponsibility and political partisanship that we have seen in Washington,' Mr Mandelson said in an interview with the BBC.

Mr Mandelson said the EU's executive Commission would propose measures to reinforce cooperation among regulators, bankers and governments and to clarify the role of credit rating agencies.

But he said a broader international response to the global financial crisis was needed.

He said French President Nicolas Sarkozy, British Prime Minister Gordon Brown and German Chancellor Angela Merkel had all contacted US President George W. Bush in the last few days to urge him to call an international conference to put in place institutional reforms and regulatory changes.

Mr Sarkozy called last week for a summit of world leaders in November to examine ways to overhaul the financial system.

The American banking system would never be the same again after the crisis, Mr Mandelson said.

'The American banking system is going to have to reinvent itself... It's going to be consolidated, it's going to operate in a different way, it's going to have to operate with more responsibility, less risk,' he said.

Rejection 'very disappointing': Brown
British Prime Minister Gordon Brown said on Monday that the rejection of a US$700 billion (S$1 trillion) Wall Street bailout plan by the US House of Representatives was 'very disappointing.'

Mr Brown said he had told the Bush administration that he supported 'decisive action' in the US financial markets amid continuing turmoil, and was prepared to do 'whatever action is necessary' to ensure stability in Britain.

'The vote in America is very disappointing,' said Mr Brown, adding that he had 'sent a message to the White House about the importance that we attach to taking decisive action' there.

'In recent times, we in Britain have taken decisive action to maintain the stability of our system,' he said, hours after the nationalisation of Bradford & Bingley, the second British bank taken into public ownership this year.

Mr Brown said that he, finance minister Alistair Darling and the governor of the independent Bank of England 'will take whatever action is necessary to ensure the continued stability of the system to the benefit of families and businesses and their security right across the country.'

US allies to press Congress to pass bailout: Australian PM
US allies will press Congress to urgently pass a huge bailout package for the financial system as failure to do so would hurt the US and world economies, Australian Prime Minister Kevin Rudd said on Tuesday.

Mr Rudd said he had spoken to British Prime Minister Gordon Brown overnight and they had agreed to urge US lawmakers to reverse their decision Monday to reject the US$700 billion package, saying that had been 'a bad development'.

'The attitude that we will adopt, and I believe other friends and allies of the United States will adopt, is to urge the United States Congress to pass this or a similar measure when it is represented to the Congress later this week,' Mr Rudd told a news conference.

'This is neccessary for the stabilisation of US financial markets and necessary for stabilisation of global financial markets,' he said.

'If the bill is not passed, the consequences will be significant for both the US and the world, Mr Rudd said, adding: 'We intend to be arguing this case strongly, robustly in the days ahead.'

'These are difficult times, these are worrying times,' he said, but moved to reassure Australians that the local financial sector remained sound and was in a strong position to see itself through the crisis.

As Mr Rudd spoke, the Australian stock market went into free fall within minutes of opening, tracking a rout on Wall Street Monday after Congress rejected the bailout package. -- AFP, REUTERS