US Treasury vows to protect financial markets

WASHINGTON: Treasury Secretary Henry Paulson will do all he can to protect the financial markets and the economy after the House rejected a proposed $700 billion rescue bill for the financial system, a Treasury department spokesman said Monday.

Treasury spokeswoman Michel Davis said Paulson would be consulting with President Bush, Federal Reserve Chairman Ben Bernanke and congressional leaders on what next steps to take.

Stocks have plunged and investors have fled to the relative safety of Treasury bonds after the House voted 228-205 to reject the proposal. The legislation would have provided up to $700 billion to the Treasury Department to purchase toxic assets linked to bad mortgage loans that are currently weighing down the financial system.

In her statement, Davis said Treasury officials "stand ready to work with fellow regulators and use all the tools at our disposal, as we have over the last several months, to protect our financial markets and the economy."

Davis did not suggest what the administration will do next or explain what steps Treasury will take now to stabilize financial markets.

At the White House, deputy press secretary Tony Fratto said the administration will talk with congressional leaders before deciding what to do.

Paulson had spent the day before the House vote on the telephone speaking to lawmakers, seeking their support.