The House, which rejected an earlier version of the bailout on Monday by 228 votes to 205, voted 263 to 171 to pass the largest US government economic intervention since the 1930s.

House Democrats piled up 172 votes for the bailout, compared to 91 members of the minority party, reflecting the waning power of the Bush administration which backed the bailout during two weeks of high political drama.

Lawmakers said the combination of tumbling stocks, which pulled down market-linked pension plans, and a credit freeze which had bitten deep into the day-to-day economy, had changed the political calculation since Monday.

The top House Republican John Boehner said the version of the bailout passed by the House was superior to the original version requestion by the Bush administration, which some critics described as a "blank cheque''.

"The passage of this flawed but necessary bill is not cause for celebration,'' he said, saying Congress had allowed sectors of the finance industry to "run amok''.

House speaker Nancy Pelosi immediately signed the bailout package, which allows the US Treasury to buy up billions of dollars in bad mortgage debts choking the US economy, and sent it to President George W Bush for his signature.

Bush signed the economic rescue bill just hours after the US House of Representatives reversed course and approved the Bill.