Updated from 12:51 p.m. ET

Financial stocks were falling sharply Tuesday, after Treasury Secretary Timothy Geithner detailed new government initiatives to help the sector.

The KBW Bank Index was declining 13.9% to 26.74, and the Financial Select Sector SPDR ( XLF) exchange-traded fund was dropping 10.2% to $8.89.

In a speech in Washington, D.C., Geithner said the Treasury will establish a Financial Stability Trust that would issue a "stress test" for major banks to evaluate potential future losses. Banks with more than $100 billion in assets will be subject to federal supervision and a stress test.

Other provisions include a public-private investment fund that would aid financial firms in shoring up their balance sheets; an expansion of the Federal Reserve's previously announced Term Asset-Backed Securities Lending Facility, increased government support for small-business loans and a comprehensive housing program to prevent additional foreclosures.


Will the government's latest bank-rescue package keep the financial crisis from getting worse?

Yes, and I expect things to turn around quickly
Yes, but it's going to take some time
No, but at least it won't make things worse
No, because it doesn't address the root of the problem

Geithner also emphasized increased accountability in the use of taxpayer dollars to revitalize the system. "Access to public support is a privilege, not a right," he said.

Dow Jones Industrial Average component Bank of America ( BAC) was leading the index's decline, falling 19% to $5.56. Fellow Dow members American Express ( AXP), Citigroup ( C) and JPMorgan Chase ( JPM) were also taking losses. American Express fell 10% to $15.97, Citi dropped 15.2% to $3.35 and JPMorgan Chase skidded 9.8% to $24.62.

Spreads on credit default swaps for Citigroup were widening as Geithner outlined his new financial rescue plan, according to a Reuters report. Credit default swaps are instruments that insure an entity's debt against default.

BofA and Citi are the largest participants in the government's existing Troubled Asset Relief Program, having each received $45 billion in equity investments from the government and additional guarantees on their assets.

Among other large financial firms, Goldman Sachs ( GS) was down 7.7% to $90.40. Morgan Stanley ( MS) fell 11.4% to $20.79.

Wells Fargo ( WFC) stumbled 14.2% to $16.35.

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