WASHINGTON (Reuters) - Republicans’ hopes for only modest losses in November’s congressional election appeared to be fading as fears of an economic collapse and panic on Wall Street fuel U.S. voters’ wrath, political analysts and lawmakers said on Monday.

The House’s failure to pass a $700 billion bailout for financial institutions, at least partly because of significant Republican opposition, could contribute to the volatility of an already chaotic election season. But more time will be needed to gauge the impact.

“Democrats have actually gained momentum because of the economic crisis in the past few weeks,” Larry Sabato, a political science professor at the University of Virginia, told Reuters shortly before the House of Representatives vote.

While the trend is not irreversible, “on the whole, a bad economy hurts the president’s party and the president’s party is the Republican Party,” he said.

Democratic presidential candidate Barack Obama has already seen his lead in opinion polls widen over Republican rival John McCain, with the economy topping voters’ worries.

Sabato pointed to several congressional races where incumbent Republicans had been doing well, only to see their poll numbers drop in recent weeks as voters focused more and more on the economy.

He cited a Courier-Journal Bluegrass poll in which Senate Republican leader Mitch McConnell now appeared locked in a “dead tie” against a challenger seeking his Kentucky seat, after earlier showing strong poll numbers.

In Oregon, centrist Republican Sen. Gordon Smith, who is trying for a third six-year term, has also fallen into a dead heat with his opponent after looking as if he was making progress.

With Congress having to deal with the difficult Wall Street crisis so close to the November 4 election, Sabato likened the situation to 1980, when Democratic President Jimmy Carter’s re-election was doomed by the disastrous collapse of his efforts to rescue U.S. hostages being held in Iran.

“That’s what comes to mind,” Sabato said.

The political landscape had been brightening for Republicans in mid- to late-summer, when they successfully pushed for legislation allowing more domestic offshore oil exploration in the midst of record gasoline prices.

‘DRILL BABY DRILL’

Republicans, and even some Democrats, saw the “drill-baby-drill” approach resonating with voters and congressional Republicans were further buoyed by McCain’s surprise pick of Alaska Gov. Sarah Palin as his vice presidential running mate.

Now, with Palin coming under intense scrutiny and stumbling in a high profile interview with CBS News, many Republicans are starting to worry about her qualifications for the vice presidency, congressional aides said.

Gasoline prices, still steep in consumers’ minds, have come off their high mark. Simultaneously, more weighty worries have taken over with the rash of failures of large U.S. banks and Wall Street firms, threatening voters’ life savings.

“We were on our way up until Thursday night,” said Rep. Tom Cole, an Oklahoma conservative who leads efforts to elect more House Republicans. Then came the “political shock.”

He was referring to a briefing on Thursday September 18 at the Capitol when Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke warned of dire economic consequences unless Congress approved the $700 billion bailout to shore up the financial system.

Cole’s counterpart, Democratic Rep. Chris Van Hollen of Maryland, would not predict how many seats his party would pick up on November 4, saying only that there will be gains.

“There’s no doubt that you’ve seen a significant change. The voters are very focused on the economy,” he said.

With U.S. unemployment rising, home foreclosures at record levels and the budget deficit skyrocketing, Van Hollen said “voters understand and are suffering the consequences of eight years of Bush economic policies.”

Republican Rep. Paul Ryan of Wisconsin, may have summed it up shortly before the bailout vote failed. “The problem is we’re one month away from an election,” he said. “We’re all worried about losing our jobs.”