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Updated from 10:38 a.m. EDT

Stocks on Wall Street took a plunge Monday as traders awaited action by Congress on government support for the financial sector and assessed


(C) - Get Free Report

government-assisted purchase of


(WB) - Get Free Report



Dow Jones Industrial Average

dropped 272 points to 10,871, and the

S&P 500

lost 40 points to 1173. The


plummeted 89 points to 2095.

Friday, the three major indices started in negative territory but finished at session highs after President Bush said Treasury Secretary Henry Paulson's proposed $700 billion aid package for the financial system would soon pass through Congress. Traders also were contending with the

failure of Washington Mutual

(WM) - Get Free Report

and its subsequent sale to

JPMorgan Chase

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Over the weekend,

Congress was finalizing

the bailout proposal. A report from the

Associated Press

indicated that the House of Representatives would vote on the bill Monday, and the Senate would follow suit later in the week.

The FDIC announced early Monday that Citigroup was buying the senior and subordinated debt as well as banking operations of


, 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.

"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

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, JPMorgan,

Morgan Stanley

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Bank of America

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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.

Meanwhile, Morgan Stanley got a $9 billion investment from Japanese bank

Mitsubishi UFJ


A report in

The Wall Street Journal

said that private equity companies

Bain Capital


Hellman & Friedman

were in the hunt to buy the

Neuberger Berman

arm of bankrupt brokerage

Lehman Brothers



Financial Times

reported that

insurance firm AIG

(AIG) - Get Free Report

was contemplating the sale of 15 of its businesses to repay an $85 billion bridge loan from the

Federal Reserve

and keep from being taken over by the government.

The credit crisis was also causing turmoil overseas. European governments early Monday arranged rescues of

Bradford & Bingley




Hypo Real Estate


Johnson said it's worrisome that the financial crisis is being transmitted to other parts of the world. He said that the globalization of the turmoil means lenders of last resort will now have to coordinate internationally.

Looking at the day's earnings, electronics retailer

Circuit City

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reported a wider second-quarter loss and withdrew its previous 2009 earnings forecast.

Pharmacy chain



, meanwhile, reported profit that rose 13% year over year on strong revenue.

In the pharmaceutical sector,



was still in talks to sell itself to a large drugmaker following a hostile takeout bid from

Bristol-Myers Squibb

(BMY) - Get Free Report


As for economic data, the Department of Commerce said that in August, personal incomes rose 0.3%, up from a 0.7% decrease in July and above economists' estimates. Personal spending was flat in August, falling short of analyst predictions of 0.2% growth.

In the commodities space, the price of crude oil was declining $6.54 to $100.35 a barrel, and gold was gaining $15.10 to $903.60 an ounce.

Longer-dated U.S. Treasury securities were rising in price as investors sought safety from the credit crisis. The 10-year note was up 1-19/32 to yield 3.66%, and the 30-year was gaining 2-24/32, yielding 4.21%. The dollar was rising sharply against the euro and pound but falling vs. the yen.

Overseas exchanges, including the FTSE in London and the Dax in Frankfurt, were taking losses. Asian indices such as the Nikkei in Japan and the Hang Seng in Hong Kong closed on the downside.