Updated from 10:53 a.m. EDT

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

Citigroup's

(C) - Get Report

government-assisted purchase of

Wachovia

(WB) - Get Report

.

The

Dow Jones Industrial Average

dropped 283 points to 10,860, and the

S&P 500

lost 44 points to 1169. The

Nasdaq

plummeted 86 points to 2097.

Over the weekend,

Congress was finalizing

the Treasury's $700 billion bailout proposal to aid the floundering financial sector. 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.

Peter Morici, professor at the University of Maryland's Robert H. Smith School of Business, wrote in an email, "The bailout hardly restricts executive compensation. Those provisions are vague, except for golden parachutes, and really only apply to banks the government would take over."

Morici also wrote that the possibility of the government taking equity positions in banks doesn't necessarily mean that firms' management practices will change.

Hugh Johnson, chief investment officer at Johnson Illington Advisors, said he's more optimistic. "Given time, if properly executed, this plan should work," he said. He also said he's confident

Federal Reserve

Chairman Ben Bernanke will take further action if the proposed legislation fails to mitigate credit-market unrest.

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

Wachovia

, 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 Johnson. By his count, only five major players are left in the financial space:

Goldman Sachs

(GS) - Get Report

,

Morgan Stanley

(MS) - Get Report

,

Bank of America

(BAC) - Get Report

, 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.

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

and

Hellman & Friedman

were in the hunt to buy the

Neuberger Berman

arm of bankrupt brokerage

Lehman Brothers

.

The

Financial Times

reported that

insurance firm AIG

(AIG) - Get 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.

Shares of

National City

( NCC) were dropping precipitously, losing 42% of their value to trade near the $2 mark as investors feared it may be the next bank to fall.

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

Bradford & Bingley

,

Fortis

and

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

(CC) - Get Report

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

Pharmacy chain

Walgreen

(WAG)

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

In the pharmaceutical sector,

ImClone

(IMCL)

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

Bristol-Myers Squibb

(BMY) - Get 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 $6.20 to $100.69 a barrel, and gold was gaining $13.90 to $902.40 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 1-22/32 to yield 3.65%, and the 30-year was gaining 3-11/32, yielding 4.18%. 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.