Sept. 29, 2008 -- The stunning defeat of the massive Wall Street bailout bill throws the politics of the nation's economic crisis wide open, scrambling the campaign strategies of both Democrats and Republicans as the nation adjusts to an even bleaker economic outlook.
In an extraordinary -- if not unprecedented -- scene Monday, a bill backed by President Bush, both presidential candidates and congressional leaders from both parties went down in defeat in the House of Representatives, by a vote of 228-205.
The vote forces congressional leaders and the White House to go back to the negotiating table to find a way to wrest a final few votes out of a legislative body whose members are increasingly concerned about their own job security, to say nothing of that of their constituents.
Amid the finger-pointing and accusations -- and members of both parties share significant portions of the blame for Washington's inability to act -- a new political reality emerges.
The changed landscape is marked by widespread mistrust of all branches of government; a powerless president and a paralyzed Congress; and above all a sinking realization that, five weeks before Election Day, the American economy is likely to get significantly worse before it can hope to get better.
The immediate fallout respects no party lines: The defeat reflects poorly on Sen. John McCain -- who made a dramatic return to Washington last week in the hopes of salvaging a deal that ultimately collapsed -- as well as the Democratic-controlled Congress, which looks powerless in the face of crisis.
"It's ugly," said Whit Ayres, a Republican political consultant. "It makes the Congress look pretty irresponsible. But the more negative the current environment, the higher the hill McCain has to climb."
More broadly, the reaction on Wall Street portends a worsened economic climate in the five-week run-up to Election Day, raising the incumbent party's burden.
Given the widespread economic unease, said Chris Lehane, a Democratic strategist, "I would not even bet valueless Lehman stock on McCain winning."
But the politics on the presidential level are complicated by the fact that Sen. Barack Obama also supports the bill that was defeated in the House. Within minutes of the vote, Obama appeared before a crowd in Colorado to express confidence that a deal would still be struck.
"It will get done," Obama said. "Democrats and Republicans in Washington have a responsibility to make sure an emergency rescue package is [approved]. There are going to be some bumps and trials and tribulations and ups and downs before we get this rescue package done."
Earlier in the day, McCain had boasted of his efforts to craft the very package that would later go down in defeat -- powered by the votes of the two-thirds of Republican House members who voted against the package.
"I put [my campaign] on hold to fight for the rescue plan that puts you and your families and working Americans first," McCain said at a rally in Columbus, Ohio.
There is a potential upside for McCain: He can claim to be one of the few prominent voices who warned early on that the package proposed by the Bush administration was a nonstarter.
"McCain can probably make something of it," said Julian Zelizer, a political historian at Princeton University. "The bill seems unpopular. He was the guy who gave a warning on Friday about what was going to happen, and now it seems to come true."
Senior McCain adviser Douglas Holtz-Eakin quickly blamed Obama and his fellow Democrats for the package's collapse.
"Barack Obama failed to lead, phoned it in, attacked John McCain, and refused to even say if he supported the final bill," he said. "This bill failed because Barack Obama and the Democrats put politics ahead of country."
House Republican leaders quickly blamed Democratic leaders for contributing to a polarized political environment. They cited House Speaker Nancy Pelosi's floor speech today as a major reason that Republicans changed their minds; her speech blamed President Bush and his fellow Republicans for "the foundation of ... fiscal irresponsibility, combined with an 'anything goes' economic policy."
That speech caused Republican lawmakers to vote "no," said House Minority Leader John Boehner, R-Ohio.
"I do believe we could have gotten there today had it not been for this partisan speech the speaker gave on the floor of the House," Boehner said.
But Pelosi said Republicans couldn't deliver the votes they'd promised.
"We delivered on our side of the bargain," said Pelosi, D-Calif., vowing to continue to work to find a bill that can pass Congress. "The legislation may have failed; the crisis is still with us."