Credit markets continue to freeze up prior to the US lawmakers' vote - meaning that mortgage rates are likely to rise sharply.
The US house of representatives is to vote on the treasury's financial services bailout plan today.
On Monday, the lawmakers voted against the bill over concerns about its burden to the taxpayer - resulting in near-panic on stock exchanges. However, an amended bill was passed by the senate later and hopes are high that it will eventually be passed.
The markets remain nervous, however, and inter-bank lending and other forms of credit continue to seize up. This lack of funding could have severe knock-on effects on businesses and consumer loans - with mortgage rates being put up in order to generate revenues for banks.
New York's Dow Jones was down 348.22 points, or 3.22 per cent - while the Nasdaq fell by 4.48 per cent. Meanwhile Libor - a key inter-bank lending rate and measure of confidence within the financial services sector - rose for the fourth day in a row.
Lending to businesses, otherwise known as the commercial paper (CP) market, has also slowed markedly - and there remain doubts over whether or not the bailout scheme will improve things. "Investors are still concerned about the efficiency of this rescue plan and how it can help the global economy," Aric Au of Phillip Securities in Hong Kong told the BBC.
Speaking to Bloomberg Gregory Peters, head of credit strategy at Morgan Stanley in New York, added: "It's going to get much, much worse. The credit markets are effectively shut, the CP market, which there's not enough focus on, is under complete duress. That can't be sustained, as that's the lifeblood of corporations funding themselves."
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