Banks Are Running Out of Options

Ellis agrees, adding that the hodgepodge approach of rescuing some firms while letting Lehman fail, and unveiling new initiatives each day, has created considerable uncertainty about what's next. The congressional hearings on the bailout plan and its initial failure in the House of Representatives also gave the impression that those charged with solving the crisis don't have a good handle on the problem and can't agree on a solution.

"I think the general feeling out there [in the stock market] is this thing is just being abysmally handled all the way down the line," Ellis says.

Paulson acknowledged on Wednesday that more financial firms will inevitably crumble, despite the failure, bailout or takeover of several of the country's largest institutions. First Bear Stearns fell in March, then Freddie, Fannie and AIG were rescued by the government last month.

Soon after, Merrill Lynch was acquired by Bank of America (BAC Quote), Washington Mutual failed, with its branches scooped up by JPMorgan Chase (JPM Quote), and Citigroup (C Quote) and Wells Fargo (WFC Quote) became embroiled in a fight over Wachovia (WB Quote).

Donald M. Raftery, a banking consultant with Greenwich Associates, said several of the firm's "banking clients have told us about very nervous business owners. One banker today told us their client was "wigging out" over access to working capital to keep their business going."

"They are looking for reassurance," he says. "They are looking for consistency, they are looking for stability in this turmoil."