AP
Business Highlights
Monday September 29, 6:31 pm ET

Shocking defeat for economic bailout; record stock dip

WASHINGTON (AP) -- In a vote that shocked the capital and worldwide markets, the House on Monday defeated a $700 billion emergency rescue for the nation's financial system, ignoring urgent warnings from President Bush and congressional leaders of both parties that the economy could nosedive without it.

More than two-thirds of Republicans and 40 percent of Democrats opposed the bill. Leaders from both parties pledged to try again, as Bush huddled with his economic advisers about a next step. The House was to reconvene on Thursday instead of adjourning for the year as planned.

Stocks tumble as bailout plan fails in House

NEW YORK (AP) -- Wall Street's worst fears came to pass Monday, when the government's financial bailout plan failed in Congress and stocks plunged precipitously -- hurtling the Dow Jones industrials down nearly 777.68, or 6.98 percent, to 10,365.45, the largest one-day point drop ever.

Credit markets, whose turmoil helped feed the stock market's angst, froze up further amid the growing belief that the country is headed into a spreading credit and economic crisis.

The selling was so intense that just 162 stocks rose on the NYSE -- and 3,073 dropped.

Citigroup to buy Wachovia banking operations

NEW YORK (AP) -- Citigroup agreed Monday to purchase Wachovia's banking operations for $2.1 billion in a deal arranged by federal regulators, making the Charlotte, N.C.-based bank the latest casualty of the widening global financial crisis.

The deal greatly expands Citigroup's retail franchise -- giving it a total of more than 4,300 U.S. branches and $600 billion in deposits -- and secures its place among the U.S. banking industry's Big Three, along with Bank of America Corp. and JPMorgan Chase & Co.

Consumer spending weakens as stimulus fades

WASHINGTON (AP) -- Consumer spending in August turned in the weakest performance in six months, underscoring the threat the economy faces as the government's stimulus program fades into the past.

The Commerce Department reported Monday that consumer spending was unchanged in August, even worse than the small 0.2 percent gain economists had expected. It was the weakest showing since spending was also flat in February.

Oil plunges $10 as US bailout plan voted down

NEW YORK (AP) -- Oil prices plunged more than $10 a barrel Monday as a U.S. financial bailout plan failed to win legislative approval, raising the specter of a prolonged economic downturn that could drastically erode global energy demand.

Light, sweet crude for November delivery sank $10.52, or 10.1 percent, to settle at $96.36 on the New York Mercantile Exchange, after earlier dropping as low as $95.04. It was crude's lowest trading level since prices edged back below $100 earlier this month; crude previously hadn't traded that low since February.

European banks bailed out as crisis spreads

LONDON (AP) -- European governments announced a flurry of bank bailouts from Germany to Iceland on Monday, but the rescue deals only heightened fears that the contagion from the U.S. credit crisis has much further to spread before the financial system recovers.

The governments of Belgium, the Netherlands and Luxembourg took partial control late Sunday of struggling bank Fortis NV, while Britain seized control of mortgage lender Bradford & Bingley early Monday.

Fed makes billions available to battle crisis

WASHINGTON (AP) -- The Federal Reserve and foreign central banks moved Monday to pump billions of dollars to cash-strapped banks at home and abroad in a dramatic bid to break through a credit clog and spur lending.

The Fed said the action is intended to "expand significantly" the cash available to financial institutions, its latest effort to relieve the worst credit crisis since the Great Depression.

The goal is to boost the amount of quick cash available to banks and other financial institutions so that they'll feel more confident and inclined to lend.

Fannie, Freddie disclose subpoenas, investigations

WASHINGTON (AP) -- Adding to their woes, mortgage finance giants Fannie Mac and Freddie Mac are facing a federal grand jury investigation into their accounting practices.

The mortgage finance companies said Monday that a federal grand jury in New York is investigating accounting, disclosure and corporate governance issues, and that they received subpoenas from the U.S. Attorney's office in Manhattan as well as requests from the Securities and Exchange Commission that they preserve documents.

Fannie Mae and Freddie Mac were taken over by the government earlier this month as their mounting defaults and foreclosures threatened the entire mortgage market.

Cadbury pulls melamine-laced chocolate from China

HONG KONG (AP) -- British candy maker Cadbury said Monday it is recalling 11 types of Chinese-made chocolates found to contain melamine, as police in northern China raided a network accused of adding the banned chemical to milk.

A Cadbury spokesman said it was too early to say how much of the chemical was in the chocolates made at its Beijing plant, and another company official said the factory was responsible for only 0.5 percent of global sales and supplies Australia, Taiwan, Nauru, Hong Kong and Christmas Island.

Private equity firms to buy Lehman's Neuberger

NEW YORK (AP) -- Lehman Brothers Holdings Inc. on Monday agreed to sell its investment management business to a pair of private-equity firms, fetching $2.15 billion as the bankrupt investment bank continues its liquidation.

Bain Capital Partners and Hellman & Friedman, two of the nation's biggest buyout firms, will now control Lehman's operations in fixed-income and alternative asset management. The deal includes money management firm Neuberger Berman, a 69-year-old name on Wall Street that now manages more than $130 billion of investments.

Circuit City has bigger 2Q loss, withdraws outlook

RICHMOND, Va. (AP) -- Circuit City Stores Inc. withdrew its outlook for the full year and posted a wider second-quarter loss Monday as it looks toward a holiday shopping season which has even the least vulnerable retailers worried.

Circuit City -- which replaced its CEO last week -- said it lost $239.2 million, or $1.45 per share, in the three months ended Aug. 31, compared with a loss of $62.8 million, or 38 cents per share, in the same quarter last year.

By The Associated Press

The Dow fell 777.68, or 6.98 percent, to 10,365.45, its largest one-day point drop ever.

Broader stock indicators also tumbled. The Standard & Poor's 500 index declined 106.85, or 8.81 percent, to 1,106.42. It was the S&P's largest-ever point drop and its biggest percentage loss since the Oct. 19, 1987, crash.

The Nasdaq composite index fell 199.61, or 9.14 percent, to 1,983.73, the third worst percentage decline for the index.

The Russell 2000 index of smaller companies fell 47.07, or 6.68 percent, to 657.72.

Light, sweet crude for November delivery sank $10.52, or 10.1 percent, to settle at $96.36 on the New York Mercantile Exchange, after earlier dropping as low as $95.04.

In other Nymex trading, heating oil futures fell 22.89 cents to settle at $2.7885 a gallon, while gasoline futures dropped 26.81 to settle at $2.397 a gallon. Natural gas futures lost 40.7 cents to settle at $7.221 per 1,000 cubic feet.

In London, November Brent crude fell $9.56 to settle at $93.98 a barrel on the ICE Futures exchange.