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WASHINGTON (CBS) ― The morning after Congress rejected a massive $700 billion package aimed at supporting flailing financial institutions, President George W. Bush sought to emphasize the seriousness of the credit crisis and the need for passage of the bailout.

"We're at a critical moment for our economy and we need legislation," he said.

Mr. Bush dismissed the notion that action on the bill, which was narrowly defeated yesterday, represented a choice between costly government action and the smooth functioning of the free market.

Instead, Mr. Bush emphasized that the credit crisis required fast action by Congress, or else, "the economic damage will be painful and lasting."

Mr. Bush said Tuesday that the economy is depending on "decisive action on the part of our government."

He said he wanted to "assure our citizens and citizens around the world that this is not the end of the legislative process."

He also said "it matters little what path a bill takes to become law. What matters is that we get a law. We're at a critical moment in our economy."

CBS News White House correspondent Bill Plante said that White House officials admitted they did not do a good job of convincing the public of the urgency and necessity for the $700 billion before yesterday's vote. Many lawmakers faced fierce opposition to the bill from their constituents.

The president said he acknowledges "this is a difficult vote for members of Congress" and that many are uncomfortable with what's transpiring in the economy. But he also declared: "We're in an urgent situation and consequences will grow worse each day we do not act.

"We're facing a choice between action and the real prospect of economic hardship for millions of Americans," the president added. "For the financial security of many Americans, Congress must act."

Congress To Take New Crack At Bailout

Top congressional and White House officials, stunned when the House rejected a massive rescue plan for the nation's economy, scrambled to structure a new bailout proposal that would attract reluctant lawmakers and still soothe the unnerved financial markets.

"Doing nothing is not an option," House Majority Leader Steny Hoyer, D-Md., said after seeing the $700 billion emergency package for the nation's financial systems fail 228-205 on Monday.

With the House not scheduled to meet again until Thursday, congressional leaders and Bush administration officials promptly sought to assess what types of changes could win over enough votes to guarantee success.

The outcome of Monday's vote fed a huge sell-off in the stock market, sending the Dow Jones Industrial Average into its biggest single-day plunge, 777 points. The House vote and the market's terrified reaction shook Washington and New York centers of power - even overseas markets - but no immediate solution seemed at hand.

The bill's failure came despite furious personal lobbying by Bush and support from House leaders of both parties. But the legislation was highly unpopular with the public, ideological groups on the left and the right organized against it, and President Bush no longer wielded the influence to leverage tough votes. Even pressure in favor of the bill from some of the biggest special interests in Washington, including the U.S. Chamber of Commerce and the National Association of Realtors, could not sway enough votes.

The legislation the administration promoted would have allowed the government to buy bad mortgages and other deficient assets held by troubled financial institutions. If successful, advocates of the plan believed it would help lift a major weight off the already sputtering national economy.

Treasury Secretary Henry Paulson emerged after the vote and warned of a credit crunch that would affect American businesses and said families would find it harder to get student loans and car loans.

"We need to work as quickly as possible," he said gravely. "We need to get something done."

Peter Morici, a professor of business at the University of Maryland, told Early Show anchor Maggie Rodriguez, that the effects of the credit crisis will be felt across the economy, especially since the bailout package failed.

"This impedes the ability of banks to make loans to businesses, to hire people and to just keep their payrolls going," Morici said. "You know, a lot of department stores borrow money to buy the goods that they sell and pay them back when the goods are sold.

"If people can't borrow money to stay in business or the cost of borrowing becomes prohibitively high, they lay people off and don't hire workers, so we'll see unemployment rise more rapidly than we anticipated as the economy slows and see the slowdown deepen. It's that simple and as more people lose their jobs it recycles through and you get into the downside of the power curve, so to speak."

The sense of urgency was not universal. Many opponents of the bill argued that the package amounted to a too-costly commitment of taxpayer money to bail out financial institutions for their own mistakes.

Rep. Dean Heller, R-Nev., offered a typical sentiment. "I cannot with good conscience put Nevada's taxpayers on the hook for the foolish excesses of Wall Street," he said. "Congress should pass legislation that protects the taxpayer, assists with bad assets and allows the market to correct itself."

On The Early Show, Rep. Marsha Blackburn, R-Tenn., who voted against the bailout, told anchor Harry Smith, "We're committed to finding a resolution to this. I think by week's end, we will have a solution to this problem."

Blackburn said there was "too much bailout and not enough workout" in this legislation. "There are some other things that could and should be done first and should be done in conjunction with the actions that were [voted on] yesterday."

Rep. James Moran, D-Va., who voted for the measure, said he was surprised at the number of Democrats who voted against it. "I'm surprised it was that high," Moran told Smith. "This is a Republican bill. It was the Bush/Cheney administration with Secretary Paulson who offered it. Getting 60% of the vote was pretty impressive. What was shocking was that the Republicans voted against it, two-thirds of them. I mean, I don't know where the leadership was.

"The Democrats were willing to hold the vote open, so that the president could call members and get them to switch their vote, but it didn't happen."

Moran suggested a market fall of an additional thousand points might get members to switch their votes.

When asked by Smith why enough Democrats didn't vote for the bailout to cover for reluctant Republicans, Moran said, "Speaker Pelosi had said to Minority Leader Boehner, 'If you can put 110 votes up, we'll match it. We will at least do half of this task, but we don't want to own this bill. This is your bill. If it's our bill, we want to put in mortgage protections to help out the homeowners as much as we do Wall Street. We want to pay for the bill so we can do other initiatives rather than financially strapping the country for the next decade.'

"There are a number of things the Democrats wanted [and didn't get] but nevertheless they realize the urgency of the situation, so almost two-thirds of it went ahead and voted for it," Moran said.

He said Tuesday was key, being the last day of the financial quarter, and a day when a number of businesses who cannot get a cash infusion may go under.

(© 2010 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)

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