The Dow Jones dropped more than 370 points Monday as jittery investors awaited details of a plan by the U.S. government to bail out banks saddled with toxic assets.

The Bush administration is seeking a $700-billion bill from lawmakers to buy the bad mortgage debt that has burdened lenders since the sub-prime credit crisis hit over a year ago.

Despite the bailout, investors aren't sure the plan can successfully mop up the problem and boost the sagging housing market.

"It's just too big to analyze on a one-day view," John Haynes, strategist at Rensburg Sheppards, told Reuters. "The Fed, I think, is going to win in the end, but as to whether stocks go up or down in the next three months, it's the toss of a coin."

In New York, the Dow Jones fell 372.75 points to finish at 11,015.69, while the Nasdaq dropped 94.92 points to end at 2,178.98.

North of the border, Toronto's S&P/TSX composite index dipped 274.92 points to 12,638.07, which marks a significant reversal from Friday's massive gain of 848 points.

Meanwhile, the Canadian dollar closed at 96.77 cents US, up 1.53 cents.

In China, the main stock market climbed almost eight per cent on Monday. In Hong Kong and Japan the main stock indexes gained more than one per cent in early trading.

Wall Street shake-up

Over the weekend, investment banks Goldman Sachs and Morgan Stanley applied to have their status changed to bank holding companies.

The U.S. Federal Bank granted the request allowing the firms to operate as "ordinary old retail banks... (with) branches around the country," said BNN's Michael Kane.

Kane told CTV's Canada AM the U.S. housing crunch has completely collapsed the investment bank model, leaving many financial service companies vulnerable to the volatile markets.

Another recent casualty was the Norfolk, West Virginia-based Ameribank. On Friday it became the twelfth regional bank to become insolvent, largely based on its reliance on the construction market.

"The regulator seized Ameribank on Friday," Kane said.

"They did open a couple of branches on Saturday. They're going to open the rest today and the Federal Deposit Insurance Corporation which insures people's deposits in regional banks, says people can use their debit cards or write cheques today to get their money out. But wow this is going to cost a lot of money for the regulatory agencies here."

Meanwhile, Canadian banks may also be able to tap into the American bail out plan, following a weekend announcement from U.S. Treasury Secretary Henry Paulson that "significant operations" outside of the U.S. could also be eligible.

According to BMO Capital Markets chief economist Sherry Cooper, "that seems to suggest that the Royal Bank of Canada, Toronto-Dominion Bank and Bank of Montreal would qualify."

All three have big commercial banking subsidiaries in the United States.

"We will continue to see de-leveraging of the U.S. financial system; as well, banks will be raising additional capital," Cooper added.

Paulson and U.S. Federal Reserve Chairman Ben Bernanke are due to appear before Congress on Wednesday for a briefing on the economy.

With files from The Associated Press