WASHINGTON - The US House of Representatives on Monday dramatically rejected a 700 billion dollar Wall Street bailout plan, throwing desperate efforts to calm the US financial crisis into disarray.

In scenes of rare suspense, tension and shock on the House floor, sworn Republican foes of the bill and rebel Democrats combined to doom the bill by 228 votes to 205, after President George W. Bush had pleaded for its passage.

Shares on Wall Street tumbled by nearly 700 points as the bill appeared headed to defeat and then recovered some 200 points as the vote was finalized.

The vote had been kept open by Democratic and Republican leaders in a bid to change the minds of those lawmakers who voted against the bill, with shock and concern painted across the faces of many lawmakers.

It was not clear what the next steps in the crisis would be, or whether Democratic and Republican leaders could reframe the legislation in a bid to ram it through on a second vote.

The situation was complicated however by the Jewish holiday which begins at sundown on Monday, meaning many members were set to return imminently to their districts.

Bush had earlier appealed directly to lawmakers to pass the proposal hammered out in exhaustive midnight oil-burning weekend talks on Capitol Hill.

"I fully understand that this will be a difficult vote," Bush said, targeting conservative Republican lawmakers who have warned the bill hands historic powers to the federal government to intervene in free markets.

The rescue package "will help keep the crisis in our financial system from spreading throughout our economy," Bush said.

Democratic House speaker Nancy Pelosi hammered the administration over the crisis, but said warnings from Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson over the failure to act were dire.

"This was a once in 100 year phenonmenon, this fiscal crisis was so drastic," she said.

"How did it sneak up on us so silently?"

In a passionate debate before the House voted, critics of the bill dismissed dire warnings from the Bush administration that the US finance system could collapse if it was not passed immediately.

Paul Broun, a Republican from Georgia compared the bill to a "huge cow patty with a marshmallow stuck in the middle of it."

Indiana congressman Mike Pence warned that the bailout ran counter to the principles of American government.

"Economic freedom means the freedom to succeed and the freedom to fail," Pence said, summing up conservative disquiet about using the power and wealth of the federal government to intervene in the free markets to buy up bad debts.

"It remains in my judgement, the largest corporate bailout in American history, forever changes the relationship between government and the financial sector and passes the cost onto the American people and I cannot support it."

Texas Republican John Culberson warned that the bill put unprecedented unaccountable power in the hands of Treasury Secretary Henry Paulson, who would have the authority to chose when and where to buy out bad debt.

"We are essentially creating a King Henry here," he said. "Don't vote to bankrupt our kids at the expense of saving some of those big Wall Street banks."

Democratic congresswoman Lynn Woolsey also joined the holdouts, complaining that taxpayers were being asked to pay for wild irresponsibility by America's top finance firms.

"Why isn't Wall Street paying for the mess they created?"

The bailout proposal grants the Treasury secretary authority to buy up toxic mortgage-related assets in troubled banks in hopes of easing the flow of credit and reviving the moribund housing market.

Posted on financialservices.house.gov and formally titled the Emergency Economic Stabilization Act of 2008, the bill calls for the immediate release of 250 billion dollars to enable the government to buy up troubled assets.

The president is authorized to approve a further 100 billion dollars, but the plan gives Congress a veto power over purchases above that limit and sets a ceiling for all purchases of 700 billion dollars.

The rescue operation will be overseen by a board including the chairman of the Federal Reserve, the Treasury secretary and the chairman of the Securities and Exchange Commission.

It prohibits "golden parachutes" for CEOs or other executives who lose or leave their jobs at companies participating in the plan as long as the Treasury holds equity in those firms.

Ahead of the November 4 election White House hopefuls Republican John McCain and his Democratic rival Barack Obama have offered cautious backing for the plan, both claiming that demands they had made had been included in the new bill.