Sept. 30 (Bloomberg) -- Officials from Microsoft Corp. to Office Depot Inc. and Schering-Plough Corp. said the government's failure to bail out the U.S. banking industry put the ``entire economy'' at risk unless a deal comes soon.

``The various sectors of the economy are so intricately linked, we need to recognize that the entire economy turns on what happens here,'' Microsoft General Counsel Brad Smith said in an interview after the House of Representatives voted 228 to 205 yesterday against giving Treasury Secretary Henry Paulson the authority to buy troubled assets from financial companies.

Executives from across corporate America echoed the remarks, the first time Microsoft says it has weighed in on financial legislation. They called on lawmakers to put aside partisan differences and work to restore credit supplies and confidence to the financial markets. The Standard & Poor's 500 Index tumbled the most since 1987 yesterday and the Dow Jones Industrial Average slid 778 points, the most points ever.

The liquidity crisis has spread beyond Wall Street, threatening earnings at businesses from retailers to technology companies. The Treasury's toolkit to protect the financial system is ``substantial but insufficient'' after the $700 billion bailout failed to pass, Paulson said yesterday.

``It is a pity that this has developed into such a mess,'' said Fred Hassan, chief executive officer of drugmaker Schering- Plough in Kenilworth, New Jersey. ``The probability of recession has gone up.''

Disbelief

General Electric Co., with businesses that span real estate, consumer finance, aerospace, energy equipment, media and health care, has talked with leaders in the House to express support for the bill, a person familiar with GE's efforts said.

The Fairfield, Connecticut-based company, which last week reduced its 2008 profit forecast for the second time this year, believes relief needs to be injected into the system even though it doesn't view the bill itself as perfect, the person said.

Business officials expected the bill to pass, even with government leaders predicting a tight vote. That's why companies didn't speak up sooner about how important the legislation was, Microsoft's Smith said.

``I absolutely cannot believe it,'' said David Cosper, chief financial officer of Sonic Automotive Inc., the third- largest U.S. publicly traded auto retailer. ``I don't think the House knows what they're doing. We need this, the markets are frozen, banks are being taken over -- it's a crisis. I think they're leaving it in the lurch and going on a break.''

While the Charlotte, North Carolina-based company doesn't have any immediate liquidity challenges, Cosper said companies with debt coming due are facing major liquidity problems.

`No Credit'

``There's no credit for businesses to work,'' Cosper said. ``I'm very frustrated by it, our whole team is.''

Computer-related stocks were among the hardest hit, with the Nasdaq Composite Index sinking 9.1 percent to 1,983.73 yesterday, the most since the technology bubble burst in 2000. Redmond, Washington-based Microsoft fell 8.7 percent and Apple Inc., the Cupertino, California-based maker of the Macintosh computer, dropped 18 percent, the most in eight years.

``It's a flight out of riskier assets into more safe-haven types of investments,'' such as consumer goods, tobacco and basic materials, said Ross Sandler, an analyst at RBC Capital Markets in New York.

Google Inc., owner of the most-popular Internet search engine, dropped below $400 for the first time in more than two years.

``The dramatic volatility we're seeing in the financial markets is clearly creating uncertainty for both marketers and consumers,'' said Michael Roth, CEO of advertising firm Interpublic Group of Cos. The New York-based company is on track to meet its financial goals for 2008, he said.

Assigning Blame

Republicans and Democrats sparred yesterday over who was to blame for the measure's failure. Democrats voted for it 140 to 95, while 65 Republicans backed the bill and 133 opposed it.

Lawmakers need to stop pointing fingers and assigning blame, said Robert S. Miller, chairman of Delphi Corp., the bankrupt auto-parts maker in Troy, Michigan.

``We are witnessing a most unfortunate and untimely collision of politics and economics,'' Miller said. ``This is not just about Wall Street. It is affecting Main Street. Bold action is required before there is further erosion of confidence.''

The Senate may take up the measure this week, and possibly send it back to the House, House Majority Leader Steny Hoyer said yesterday.

Ripple Effect

A resolution to the crisis needs to make it easier for businesses to get access to capital, said Steve Odland, CEO of Delray Beach, Florida-based office-supplies seller Office Depot.

``Our sales have been impacted as our customers have been hurting for liquidity,'' Odland said in an interview. ``The global economy is at stake here. The ripple effect has been far and wide and action needs to be taken.''

For other companies, the squeeze hurt their ability to raise debt. Akzo Nobel NV, the largest maker of paints, postponed a 1.6 billion-euro ($2.3 billion) stock buyback yesterday, sending the shares down the most in 19 years. The credit market seizure is hampering its ability to refinance loans.

``There's no liquidity,'' CFO Keith Nichols said in an interview. The Amsterdam-based company has 800 million euros of bonds due by the end of this year and another 1 billion euros in early May.

Don't Panic

Microsoft will reach out to other companies to step up pressure on lawmakers, Smith said. ``We're hoping it will get turned around. It needs to get turned around,'' he said.

Other officials also expressed optimism that the government may ultimately pass a bill.

``It's still very early for anyone to express an opinion,'' real estate billionaire Sam Zell said in an interview. ``I'm not sure it's over, in terms of what Congress did.''

Zell said it's important not to rush to make decisions, a sentiment echoed by Michael Burns, vice chairman of film maker Lions Gate Entertainment Corp.

``I'll tell you one thing we're not going to do, we're not going to panic,'' said Burns, whose firm is based in Vancouver and run from Santa Monica, California. ``We're going to wake up tomorrow and people will still go to the movies and watch `Mad Men' and buy DVDs of `Weeds.' None of that will change.''

To contact the reporters on this story: Dina Bass in Seattle at dbass2@bloomberg.net; Shannon Pettypiece in New York at spettypiece@bloomberg.net

Last Updated: September 30, 2008 00:01 EDT