The United States proposed bail-out bill has been rejected by congress by 228 votes to 205.
The White House is said to be “deeply disappointed”.
The acting speaker first attempted to pass the bill by a verbal vote but was shouted down. She was forced to put it to an electronic ballot.
That had been preceded by hours of anguished debate where house representatives slammed the shot gun politics of the White House.
They said they were being asked to vote for something which “made their stomachs turn”.
Earlier President George Bush said he was sure the bill had sufficient support.
He admitted that it was not a catch-all solution but insisted there was no other solution to prevent the collapse of the economy.
His critics said the provision was too meagre to have any substantial effect.
400 economists, including three Nobel laureates, had registered their objection to the bill.
As the gavel came down on the vote the Dow Jones Indutsrial Average plummeted, losing 600 points at one stage.