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Throughout the past three weeks, the chattering class wondered what would happen if we didn’t bail Wall Street out. Today, we got our first glimpse.

As the nays ticked upward on C-SPAN, the Dow plunged downward. At one point, it ducked below a 700-point loss on the day, as traders stood on the floor gawking at monitors with mouths agape. They looked like toddlers watching Baby Einstein, transfixed by images they never imagined possible. For the past three weeks, we were told a bailout would sooth the markets and offer closure to this episode. It was not to be. The bailout bill failed 228-205.

As chaos slashed through Wall Street, the Dow closed down almost 800 points, its biggest single-day drop ever. The Nasdaq saw nearly 10 percent of its value amputated; the S&P closed at its lowest mark since 2004. The Wall Street domino fell with a frightening thud hundreds of miles away from Washington. Even when we thought the bailout had a chance of passing, Wall Street’s future was nebulous. Now, a dark shadow hovers over the nebulosity.

The question, of course, is: Now what? Some insta-thoughts on how Congress, Henry Paulson, and President Bush can salvage this mess. If they want to.

Option 1: Tweak the margins

Don’t forget, the bill was likely to breeze through the Senate, so all congressional negotiators need to worry about is the House. The bailout bill that finally waddled to the floor of the House on Monday was loaded with half-hearted compromises to entice House Republicans. But those gestures were not enough to overpower the nut of the problem: The bailout bill creates a loan out of $700 billion of taxpayer money. For fiscal conservatives sick of seeing their party leader trample over small-government ideals, that figure was either too much to stomach personally or politically. Democrats also failed to march in perfect unison. Ninety-five Dems voted nay.

So there are two options from here on:

Pander to Republicans

The core of the Republicans’ alternative proposal was a private-insurance plan that would ask banks to pay a premium to have the government guarantee further losses. It’s a plan that could save taxpayers’ money, but it probably won’t work—the premium will be so high that banks would rather withstand losses on mortgage-backed securities. The private-insurance plan was in the bailout bill that was voted on today, but it was one of two tactics for Paulson to utilize. The other was a bailout fund that he could use to buy toxic assets. From the beginning, Paulson was explicitly on record as saying he preferred the latter to the former. Think about it: If you were a bank and had a choice between being insured or having the government take toxic, immovable objects off your hands, which would you choose? Presumably, House Republicans realized an insurance program was never going to be Paulson or the banks’ endgame, so they balked.

This suggests more genuflecting is necessary from Bush and the Democrats toward House Republicans. (I never thought Bush and the Democrats would be paired in a sentence like that.) A new bill may appetize Republicans if two things happen. First, the insurance program would need to be given a more serious role. It’s unclear how to do this since banks won’t want anything to do with it, but presumably this is a deal-breaker for some Republicans. Second, the $700 billion needs to be scaled back a bit. After all, the Treasury admitted they picked $700 billion because they “just wanted to choose a really large number.”