Dow Plunges 777 as House Rejects Bailout

"This is a wholesale dumping of stocks," said Robert Pavlik, chief investment officer with Oaktree Asset Management. "The Street is trying to indirectly send a message that if this thing doesn't get passed, you'll be faced with a wholesale market selloff, anything across the board."

Elsewhere, the FDIC announced early Monday that Citigroup (C Quote) was buying the senior and subordinated debt as well as banking operations of Wachovia (WB Quote), in a deal facilitated by the Federal Deposit Insurance Corp. The FDIC said that Wachovia did not fail. Shares of Wachovia fell from Friday's closing price of $10 to 94 cents.

Citigroup also said it would cut its dividend in half and announced plans to raise $10 billion in new capital. Wachovia shares dropped 82% to $1.84, and Citi shares slumped 5.8% to $18.98.

"Boy oh boy has the landscape changed," said Hugh Johnson, chief investment officer at Johnson Illington Advisors. By his count, only five major players are left in the financial space: Goldman Sachs (GS Quote), Morgan Stanley (MS Quote), Bank of America (BAC Quote), JPMorgan and Citigroup. "I never would have guessed that."

Johnson said that the spate of consolidation among financial firms is "going to usher in a whole mess of problems, concentration of power being among them. It's only five guys that have to sit down and figure they can rule the world." He said it would be interesting to see whom the Treasury's bailout package helps and what price it pays for troubled assets. "You can bet it's going to be watched carefully," he said.