The lower house of the US Congress has voted down a $700bn (£380bn) plan aimed at bailing out Wall Street.

The rescue plan, a result of tense talks between the government and lawmakers, was rejected by 228 to 205 votes in the House of Representatives.

About two-thirds of Republican lawmakers refused to back the rescue package, as well as 95 Democrats.

Shares on Wall Street plunged within seconds of the announcement, after earlier falls on global markets.

A White House spokesman said that President George W Bush was "very disappointed" by the result.

A US Treasury spokesman said that Mr Bush, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke would meet to discuss the way forward.

The vote followed a day of turmoil in the financial sector.

• Wachovia, the fourth-largest US bank, was bought by larger rival Citigroup in a rescue deal backed by US authorities
• Benelux banking giant Fortis was partially nationalised by the Dutch, Belgian and Luxembourg governments to ensure its survival
• The UK government announced it was nationalising the Bradford & Bingley bank
• Global shares fell sharply - France's key index lost 5%, Germany's main market dropped 4% while US shares plunged after the vote result was announced.

As news of the vote came through, traders on the floor of the New York Stock Exchange stood dumbfounded.

Analysts say that without a bail-out the banks will be left to handle all their own bad mortgage debt as best they can and more of them will be in danger of going bust.

Blame game

So grave are the consequences of this decision, reports the BBC's Kevin Connolly from Washington, that the speaker of the house paused for several long minutes after the vote was taken before declaring it official.

The no vote plunged the world of Washington politics into turmoil and the markets into deep and instant chaos, our correspondent says.

Mr Bush had argued that the bail-out plan was a "bold" one which he was confident would restore strength and confidence to the US economy.

But after a several hours of impassioned debate, the bill's opponents - the majority of whom were from the Republican Party - got their way.

They had raised concerns about both the content of the plan and the speed with which they were being asked to pass it.

Some agreement on issues such as oversight, greater protection for taxpayers and curbs on executive bonuses had been reached in fraught weekend talks.

These concessions, however, ultimately failed to persuade enough lawmakers that the plan was in the best interests of the nation.

Speaking after the vote, Republican leaders in the House of Representatives suggested the Democrats were to blame, accusing them of failing to mobilise their majority in the chamber.

Democratic presidential candidate Barack Obama spoke shortly after the vote, saying it was an outrage that ordinary people were being asked to clean up Wall Street's mess.

"If I am president I will review the entire plan on the day I take office to make sure that it is working to save our economy and (that) you get your money back," he said.

He added that he expected Congress to pass a bail-out bill in some form and called for calm, although he admitted the path could be a difficult one.

Lawmakers from both parties called for further talks on new bail-out legislation.

Frantic steps will now be taken to get some kind of amended version of the bill through Congress, our correspondent says.

But, he adds, this vote would have shaken the confidence of the financial world and the ability of America's leaders to come up with convincing answers at a moment of crisis.