The US House of Representatives rejected on Monday the $700 billion rescue plan which had been initiated by the Bush administration to bail out the country’s finance sector devastated by a massive meltdown.

The measure which would have authorized the biggest government intervention in the markets since the Great Depression went down mainly due to partisan wrangling and was defeated by a vote of 228 to 205. While Democrats voted 140 to 95 in favor of the legislation, only 65 Republicans supported the bill and 133 voted against it.

The finance rescue proposal, if passed, would have set aside $700 billion for Treasury Secretary, Henry Paulson to buy up troubled assets of finance companies. This would have gone a long way in easing up the credit crunch which continues to affect the economy in the aftermath of last year’s housing market crisis.

Markets reacted strongly to the defeat of the bail-out measure. While the Dow Jones Industrial Average plunged by 778 points or 6.98% in the biggest drop ever, the Standard & Poor’s 500 Index sank by 8.4%.

Despite Monday’s defeat, it is not yet the end of the road for the finance rescue bill. Majority leader, Steny Hoyer’s announcement that the House would take up the measure again during the week thus has already started off a scramble among its backers to garner additional support.