In a turn of events that sent the Dow Jones industrials plunging 777 points — the most ever for a single day — the House yesterday voted against the proposed $700 billion financial bailout package.

The legislation, potentially the biggest government intervention since the Great Depression, would have allowed the government to buy bad mortgages and other sour assets held by troubled banks and other financial institutions.

Many lawmakers have reported receiving thousands of phone calls and e-mails from constituents who are fiercely opposed to the plan. Real Estate Center Chief Economist Dr. Mark Dotzour thinks the public is reacting to months of misinformation from Washington and Wall Street.

“For the last 15 months, they’ve heard that the credit crunch was contained to subprime mortgages; that the U.S. supports a strong dollar policy; that Fannie, Freddie and the big banks are all adequately capitalized,” Dotzour said. “People who have invested money based on these public statements have lost a lot of money.”

He added that the government downplayed inflation while Americans watched the price of groceries and gasoline go through the roof.

“I think people are much less inclined to believe what the government says right now,” Dotzour said. “Looking back, government officials should have been more direct and told the public how serious the problem really is.”

Source: Real Estate Center