North American markets plummeted on Tuesday, suggesting U.S. Treasury Secretary Timothy Geithner failed to win over Wall Street when he outlined the government's plan to help the country's stricken banking system.
After the closing bell, the Dow Jones industrial average had fallen 381.99 points to finish at 7,888.88. North of the border, Toronto's S&P/TSX composite index dropped 229.39 points to 8,817.89.
Earlier in the day, Geithner said the government would use roughly $1 trillion in public and private support to get credit flowing again and buy banks' bad assets.
"The good news is they are going to spend a trillion dollars, the bad news is they don't know how," James Cox, managing partner at Harris Financial Group, told The Associated Press.
"They built this up as being a panacea," he said. "There was so much hope pinned on them to do a good job. The expectations have been so high. It's hard to live up to."
At a news conference Tuesday morning, Geithner discussed the Federal Reserve program that is designed to boost consumer credit and loans to small businesses.
The program, which was initially measured at $200 billion, has not yet started dispensing funds. It will also be expanded to include the commercial real estate sector and some residential mortgages.
Geithner also announced the creation of a $500 billion fund that will see both public and private money used to purchase crippling bank debt.
"Right now critical parts of our financial system are damaged," Geithner told reporters.
"Instead of catalyzing recovery, the financial system is working against recovery, and that's the dangerous dynamic we need to change."
Senate passes bailout plan
Meanwhile, the Senate passed President Barack Obama's $838-billion economic recovery plan. Three Republican senators helped get the measure passed by a slim majority of 61-37.
The Senate version of the stimulus plan must still be reconciled with the House version, so a single bill can be sent for Obama's signature by next week. The Senate has made key changes to its version of the bill, including removal of about $108 billion in spending.
Both versions include a tax cut for lower-income earners and billions of dollars for unemployment benefits, food stamps, health care and other programs. The bills also include billions of dollars for new information technology for the health-care industry and billions more to develop a new environmentally friendly energy industry.
However, the Senate version seeks more tax cuts and less spending compared to the House version. It also includes about $70 billion to protect middle-class taxpayers from the alternative minimum tax, which was originally designed to ensure that the wealthy don't neglect paying their taxes.
And the Senate wants a more generous tax break for home buyers, and also offers a tax break to consumers who are buying new cars.
The president hopes the negotiations between the two chambers of Congress will be completed within the week, before Congress recesses for the Presidents Day holiday on Feb. 16.
With files from The Associated Press
