In the currency market, the dollar pushed higher against the euro. Late Monday, the euro was trading at $1.4477 vs. $1.4608 on Friday. The British pound was also off, by 1.5%, to $1.8147.

The dollar held up remarkably well, considering the 777-point crash in the Dow—history’s largest in raw numbers—after the big Paulson bailout was rejected by Congress. Unsurprisingly, that body was sharply divided along re-election rather than party lines. With members getting an earful from angry constituents, those in tough fights for their seats voted against, those in safe seats for.

In any case, the bailout is DOA for the moment, even as the administration plots how to resurrect it, or to free up money in ways that don’t require Congressional approval. Whither the buck as the Paulson proposal lies in ashes is anyone’s guess, but it’s suffered little so far.

“The U.S. dollar weakened against the Japanese yen, but its strength against the euro and British pound indicate that the concerns for those currency pairs now shift to the prospect of further bank failures in Europe,” said Kathy Lien, director of currency research at GFT Forex.

Lien’s concerns are well taken. The day saw European governments step up to help Fortis, Bradford & Bingley and Icelandic bank Glitnir recapitalize. Brussels-based Fortis got an 11.2 billion euro injection from the Netherlands, Belgium and Luxembourg; the UK Treasury will nationalize most of Bradford & Bingley; and the Icelandic government has bought a 75% stake in Glitnir.

“At this point, debating whether the euro area is in recession or not is simply useless,” said Aurelio Maccario, chief euro-zone economist at UniCredit MIB in Milan. “With financial markets experiencing a serious risk of seizure and the real economy continuing to lose momentum, we think that the outlook is getting gloomier by the day.”

Source: Bailout Plan DOA, Investors Pummel Stocks, but Dollar Rallies