Senate negotiations have been suspended until House Republicans work out plan to proceed on debt limit and government funding, Senator Dick Durbin (D-Ill) said.
The suspension comes as the US government comes closer to it's borrowing limit on October 17. Stocks dropped to the lows of the day on the news.
Senator Diane Feinstein (D-CA) told Bloomberg News that "it's all fallen apart."
Earlier today Senate Majority Leader Harry Reid lashed out at House Republicans, shortly after the collapse of a rival GOP proposal to keep the government open and raise the debt ceiling, warning that the U.S. credit ratings could be downgraded as soon as Tuesday night
Dow Jones reported that Fitch and Moody's credit rating services declined to comment on Reid's statement. Yields on one-, three- and six-month Treasury bonds spiked and stocks retreated.
The House GOP budget plan is a "blatant attack on bipartisanship," Reid said on the Senate floor.
White House spokesman Jay Carney said on Tuesday that "we're far from a deal at this point."