WASHINGTON — The new bank rescue plan landed with a thud on Wall Street.
Worried that the revamped financial bailout was far too short on details, especially on how to clean up the books of the banks, investors drove the Dow Jones industrials tumbling more than 380 points.
Treasury Secretary Timothy Geithner announced a plan that could send as much as $2 trillion coursing through the banking system and the broader economy and stressed the government would act to stop "catastrophic failure" of financial institutions.
But investors fretted that the government was nowhere near untangling the crisis that has paralyzed the financial system and hammered the economy. Wall Street suffered its worst day since Dec. 1.
"The good news is they are going to spend a trillion dollars," said James Cox, managing partner at Harris Financial Group. "The bad news is they don't know how."
The administration called it the Financial Stability Plan, abandoning the old TARP, or Troubled Asset Relief Program. And while it may have a new name, investors were also quick to point out a whole new set of problems.
Besides worrying the plan is too light on details, Wall Street seemed concerned it does not solve the problem of how to get the soured mortgage-backed assets off banks' books _ the heart of the crisis.
Asked about the negative investor response, President Barack Obama told ABC News that Wall Street "is hoping for an easy out on this thing, and there is no easy out."
For now, the Obama administration says it does not need more than the second $350 billion chunk of the bailout fund, but it concedes that may change.
"We are going to have to adapt our program as conditions change. We will have to try things we never tried before," Geithner said. "We will make mistakes. We will go throughout periods in which things get worse and progress is uneven or interrupted."
The new approach aims to use both public and private cash to buy soured assets off the books of the banks. But the plan provides almost no detail on how the assets would be priced _ only that it would be left to the private sector. Pricing the bad assets is key, in part because pricing them too low would force banks to take devastating writedowns.
It's far from clear that the government approach, using federal loans to entice private buyers to take the soured assets, will work.
"Most fund managers see these assets and don't want to touch them," said Christopher Whalen, managing director of Institutional Risk Analytics. "They can't sell them."
The government will also use some of the bailout cash to try to kick-start as much as $1 trillion in lending _ hoping that getting the private market for bundled loans humming again will unlock credit in the rest of the economy.
Geithner also wants to put all banks with more than $100 billion in assets through a "stress test" to determine whether they can handle the losses that could come from an extended economic downturn.
But details on that part of the plan were sketchy, too, and some observers worried that the process would be messy. It also raises legal questions about what would happen to banks that refuse to participate.
"Let's say they do a stress test and conclude that a bank is insolvent. The bank could say, 'No, that's not the case and we're going to challenge you,'" banking analyst Bert Ely said. "There's a potential for a lot of litigation."
Banking industry officials reacted with caution.
"There are a lot of details that have not been provided yet, and the devil is in the details," said Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable.
Critics of how the Bush administration handled the first half of the bailout say it doled out money to banks with few strings attached and failed to get banks to resume more normal lending.
It will be at least a week before the Obama administration provides details of how it plans to help homeowners. Geithner did say the government will use $50 billion of bailout money for that, and suggested it would help reduce mortgage principal and lower mortgage rates.
Even so, "There's not a hell of a lot here to get a sense of," Sen. Robert Menendez, D-N.J., told Geithner in an appearance later Tuesday before the Senate Banking Committee.
Sen. Richard Shelby of Alabama, the committee's ranking Republican, faulted Geithner for "a conceptual plan with many details yet to be filled in."
Geithner said the administration was laying out the "broad architecture" for the program with more details to come as the new plans are designed. He stressed the urgency of moving boldly, given the troubles facing the economy and the financial system.
Details of the new bailout plan came as the Senate passed Obama's $838 billion economic stimulus plan, clearing the way for talks with the House on a compromise measure.
In his speech outlining the plan, Geithner stressed the huge $1 trillion figures represented loans that would ultimately be repaid. And he said the cost of doing nothing would be far higher.
"The complete collapse of our financial system would be incalculable for families, for businesses and for our nation," Geithner said.
Consumer advocates, who had unsuccessfully pressed the Bush administration to help individual borrowers, saw some of the changes as welcome.
"Certainly the flavor has changed and that's encouraging, but we need the meat on the bone here," said John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer group in Washington.
Associated Press Writers Alan Zibel, Stevenson Jacobs and Jim Kuhnhenn contributed to this report.