It's the first time in four years that the Dow Jones Industrial average dropped below the 10-thousand mark. The sell-off followed big declines in Asian and European markets.
The credit crisis is now global, leaving banks around the world starved for cash.
David Henderson, a trader on the New York Stock Exchange, said "the speed with which it is happening is just so phenomenal. That is what is scaring people."
President Bush promised to work with other governments to restore confidence in the global financial system, and he said the 700 billion dollar bailout package will eventually loosen the flow of money. But on Wall Street, the selling only intensified.
Traders look back at the collapse of Lehman Brothers as a turning point for this market. The investment bank filed for bankruptcy three weeks ago, triggering panic in the financial world. Today the company's top executive, CEO Richard Fuld, was called to Capitol Hill to face angry lawmakers. He said, "I feel horrible about what has happened to the company and its effects on so many." He called the bank's failure a tragedy.
But company documents show in the final days before going bankrupt, Lehman approved paying millions of dollars to departing executives.
California Congressman Henry Waxman said "In other words, even as Mr. Fuld was pleading with Secretary Paulson for a federal rescue, Lehman continued to squander millions on executive compensation"
The bailout package is designed to save other banks from Lehman's fate. No money is changing hands yet. The government is working out details on how to dole out the money, but it has chosen a former investment banker to head the program.