A week of tumult in Washington that spread panic throughout the world’s economies ended last night with the US House of Representatives passing the $700 billion rescue package amid emotional scenes on Capitol Hill.

Having defeated the Bush Administration’s plan in a stunning rebellion on Monday - a move that wiped $1.2 trillion off shares in less then two hours - chastened congressmen lined up yesterday to declare that they now understood that the entire US economy faced catastrophe without the rescue package.

Yet even as the Bill was being signed by President Bush after the 263-171 vote - 58 of Monday’s rebels reversed course – further worrying signs of the grave state of the US economy emerged. Arnold Schwarzenegger, Governor of California, wrote to Henry Paulson, the US Treasury Secretary, warning him that his state might need an emergency government loan of as much as $7 billion to stave off bankruptcy.

Speaking minutes after the vote, Mr Paulson emphasised the significance of the package. “It was a vote to protect the American people, to protect their jobs, their economic wellbeing,” he said. Refusing to be drawn on how the money would be spent, he said: “We have been doing a lot of work, a lot of thinking, getting ready for this. We will be going out and lining up some advisers from the private sector.”

New unemployment figures are grim, showing that 159,000 jobs were lost last month, the steepest drop in five years and the ninth straight monthly decline.

The revised Bill, the largest government intervention in history, was stuffed with more than $100 billion of tax cuts and other “sweeteners” to make it palatable to enough members. However, the overwhelming sentiment during the debate before the vote was that the mood among constituents had shifted from angry opposition to desperate calls for action.

Many House members had travelled home since Monday and heard from bank managers, car dealers, local chambers of congress, restaurateurs and other small-business owners that lines of credit had dried up and failure loomed.

Emanuel Cleaver, a Democrat from Missouri who voted “no” on Monday, said: “America feels differently today than it did on Monday about this Bill.” Sue Myrick, a Republican, returned from her North Carolina district having changed her mind after local banks told her that they were at risk of collapsing. John Boehner, the House Minority Leader, held back tears: “It’s time to act on behalf of the American people. It’s about their savings, about their jobs.”

The revised Bill was given renewed momentum after the Senate passed it by 74-25 on Wednesday night. It swelled from three pages, when it was introduced to Congress two weeks ago, to more than 450 pages. Big tax break provisions were inserted to attract Republicans, as were pet “pork barrel” projects, such as a 39 cent tax break for an Oregon company that makes children’s wooden arrows.

Mr Bush, who lobbied furiously for the bailout, thanked Congress for voting “yes”. He said that the Bill was “essential to help the American economy to weather the financial crisis”.

The Bill gives Mr Paulson $350 billion immediately to start buying up toxic, mortgage-related assets from the stricken US financial sector, and another $350 billion later if Congress approves. The hope is that many of the assets will eventually become profitable, allowing the US taxpayer to recoup much of the $700 billion.

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