The United States on Tuesday rolled out a rescue plan to purge up to $500 billion of bad assets from banks' books while the Senate approved a stimulus bill to tackle America's worst recession in 70 years.
Treasury Secretary Timothy Geithner said the bank rescue included setting up a public-private fund to help cleanse bank balance sheets and get them lending again.
"We are going to keep at it until we fix it," Geithner said later on CNBC. "It's going to take a lot of time to resolve."
The Federal Reserve will also extend $1 trillion of new lending as part of the plan, adding to an array of central bank programs that Fed Chairman Ben Bernanke said have eased strains in the troubled banking sector.
The rescue plan is an overhaul of last year's widely criticized $700 billion bank bailout package, which Geithner acknowledged was viewed as unfair and inefficient.
There was no sigh of relief on Wall Street, though, as investors hoping for more specifics sold stocks, oil and the dollar. The Dow and S&P 500 indexes each tumbled more than 4 percent.
"Politicians have more belief in this plan than the markets do and at the end of the day, the only vote that really counts is going to be the market's vote," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.
The Senate voted 61-37 to approve an $838 billion stimulus bill, but it must be reconciled with an $819 billion version passed nearly two weeks ago by the House of Representatives before President Barack Obama can sign it.
NEGOTIATIONS COULD STRETCH
Obama wants the final bill on his desk by this weekend, but House Majority Leader Steny Hoyer said negotiations could stretch into the middle of next week.
The two packages are part of the Obama administration's battle plan to confront a deepening financial and economic crisis that has battered U.S. asset prices, dried up lending and cost more than 3 million jobs since the start of 2008.
The euro fell against the dollar after wobbling as Russia denied media reports it was seeking to restructure up to $400 billion of companies' foreign debts.
European shares ended 2.9 percent lower after the U.S. rescue plan came out and banking giant UBS posted the biggest annual loss in Swiss history and said it would cut 2,000 investment banking jobs. Japan's Nikkei average fell 0.3 percent.
PROTECTIONISM RISING
European finance ministers discussed the health of banks and their balance sheets at a meeting in Brussels, but a disagreement over perceived protectionism could undermine any plan to help troubled financial companies.
On Monday, French President Nicolas Sarkozy announced plans to give more than 6 billion euros ($7.78 billion) of government aid to Renault and PSA Peugeot-Citroen.
The Czech Republic, which holds the rotating EU presidency, objected when Sarkozy said recently French carmakers should move production home from plants in the Eastern European country.
The European Commission said Tuesday the French car plan had raised concerns and it had asked Paris for more details.
Britain's finance minister, Alistair Darling, said it was very important to avoid protectionism and his Swedish counterpart, Anders Borg, said the French car plan would be "problematic for Sweden."
In Iceland, which suffered the collapse of its main banks and currency last year, the new government unveiled its own rescue measures and renewed its call for the central bank chief to step down.
Prime Minister Johanna Sigurdardottir said the government would create a company to take over debts owed by the biggest companies and present a bill allowing Icelanders to tap private pension plans not otherwise accessible until retirement.
In another sign of tough times for auto companies and their employees, General Motors said it would cut its global salaried work force to about 63,000 from 73,000 this year and impose pay cuts. GM, which has taken U.S. bailout money, is expected to present a restructuring plan to the government on Feb. 17.
Obama traveled to Florida after hitting the road to Indiana on Monday to rally support for the economic stimulus plan.
Republicans have criticized the bill for having too many spending projects and not enough tax cuts, but Obama has shown little patience for their arguments.
"It's a little hard for me to take criticism from folks about this recovery package after they've presided over a doubling of the national debt," Obama said on Monday evening.
"I'm not sure they have a lot of credibility when it comes to fiscal responsibility."