Rupert Cornwell: Stunning defeat of bill exposes failures of the US political system

Yesterday was not only a black Monday for markets. It was the blackest of Mondays too for the US political system, saddled with a discredited president who has completely lost control of his own party and a Congress that responds to a national emergency with little except snarling partisanship.

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The stunning defeat of the financial bailout bill has exposed the weakness of the system at its moment of maximum vulnerability, in the quasi-interregnum of the weeks immediately before and after a presidential election. Even so, had a similar crisis erupted at the same stage of the second term of Bill Clinton or Ronald Reagan it is hard to imagine Congress staging a similar rebellion. For George W Bush, alas, it is a different story.

His lack of clout was first exposed last Thursday when the bailout summit he convened at the White House degenerated into a blazing row. But that humiliation paled beside yesterday's. The President went on TV at 7.30am to plead for the measure that had been thrashed out over the weekend, to no avail. Then he called two dozen recalcitrant House Republicans, begging them to hold their noses and do their patriotic duty – but again to no avail.

When the vote came, his own party voted almost two to one against the bill, more than cancelling out the 140-95 majority of Democrats who did hold their noses to support the wishes of a President most of them despise.

Thus did US politics enter the world of Alice Through the Looking Glass. A president who prided himself on being a champion of free markets was urging the biggest state intervention in the economy in more than 50 years.

Then not only did a majority of Republicans disown their own president. After they sent the bailout compromise down in flames, those same Republicans then blamed the Democrats for their own disloyalty, accusing Speaker Nancy Pelosi of being too harsh in her criticism of their president. This despite the fact her Democrats, instinctively far less inclined to come to Wall Street's aid, had in fact done so.

Maybe Ms Pelosi should have been more restrained in her language. Maybe the head counters on both sides can be blamed for misjudging the balance of forces. More than a dozen Republicans were assumed to be in favour when they were not.

But in a deeper sense this is a crisis of the political system. The stately and endless process of electing a new president has produced a power vacuum at the worst possible moment.

Mr Bush's power, it has been conclusively demonstrated, is exhausted. Yet more than five weeks remain until election day – when either John McCain or Barack Obama morally takes power – and three and a half months until Inauguration Day, when one of them actually moves into the Oval Office. On the campaign trail, they can make uplifting speeches and put forward ingenious proposals. But speeches and policy papers will not make banks lend again.

However, yesterday already looks like Black Monday for Mr McCain. He returned to Washington last week as the self-styled statesman who would knock heads together for the country. But he, like Mr Bush, could not bring his Republicans into line. The tumultuous events of yesterday have only strengthened the feeling that America's worst financial crisis since the 1930s has doomed his bid for the presidency – just as the crash of 1929 doomed Herbert Hoover.

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