Asia urges action on US bailout as shares plunge

"This is a bad development," Australian Prime Minister Kevin Rudd said of the U.S. House of Representatives' rejection Monday of a $700 billion plan to rescue ailing financial companies burdened with piles of bad mortgage-related debts.

"The outcome has caused a major impact not only the U.S. economy but also the world economy," said Japan's Economy and Fiscal Policy Minister Kaoru Yosano, urging Washington to renegotiate a workable package.

The bailout plan, defeated by a vote of 228-205, is aimed at preventing a possible collapse in the U.S. financial system, which would have dramatic repercussions for Asia and the entire global economy.

While few Asian financial companies have been hurt badly by the credit crisis, the fallout could spread, and a recession in the U.S. would batter Asia's export-oriented economies.

Jitters about the crisis were evident last week in Hong Kong when hundreds of customers descended on branches of Bank of East Asia to withdraw their money amid rumors spread by cell phone text messages that questioned the bank's stability. The bank and authorities called the rumors baseless, and the bank run subsided after a day or two.

On Tuesday, reports in India that depositors were beginning to pull out their money from the nation's largest private bank, ICICI Bank Ltd., promoted the Reserve Bank of India to reassure the jittery public about adequate cash reserves.

"The Reserve Bank of India is monitoring the developments and has arranged to provide adequate cash to ICICI Bank to meet the demands of its customers at its branches and ATMs," the central bank said in a statement.

The Bank of Japan pumped another 3 trillion yen ($28.7 billion) into money markets Tuesday as part of the coordinated effort of the world's central banks to boost liquidity and lending. Since the collapse of U.S. investment bank Lehman Brothers earlier this month, the BOJ has injected $200 billion into markets.

News of the bailout rejection sent many Asian stock markets plunging. Japan's Nikkei 225 sank more than 4 percent, but Hong Kong's key index reversed its early slide to close 0.8 percent higher.