The slide capped the biggest five-day point loss ever for the Dow Jones industrial average. It has lost more than 1,400 points over the past five sessions, nearly 13 percent of its value.

The Dow fell 508 points to close at 9,447. The Standard & Poor's 500 index lost 60 points to 996, its first close below the 1,000 mark since September 2003. The Nasdaq composite lost 108 points to 1,754.

The stock market continued to sink even after the Federal Reserve announced plans to buy massive amounts of corporate debt to encourage lending. Fed chief Ben Bernanke said the financial crisis could prolong the difficulty that the economy is facing, taken as a sign among some traders that a rate cut could be coming.

As stock prices tumbled, President Bush pressed European leaders to coordinate their efforts to ease the spreading financial crisis. Later, he tried to assure Americans that the U.S. economy will recover.

Speaking to employees of an office supply company in Virginia, Bush said he understood that anxieties were high as Americans' retirement funds and savings were hit.

"Right now we're in tough tough times, no question about it," he said. "But you can't convince me that in the long run we're not going to get back on our feet again, and if anybody ever says that they don't understand the American spirit."

Foreign Minister Hoshyar Zebari said the U.S. had submitted new ideas and language that "could be acceptable or reasonable," but he gave no details and cautioned that the government had not accepted them.

"I don't want to give you any false hope about where we are, but I think we are very close," he told reporters at a news conference with U.S. Deputy Secretary of State John Negroponte in Baghdad.

With the U.N. mandate authorizing coalition troops in Iraq expiring at the end of this year, Negroponte's visit comes at a key time in Baghdad. One deal apparently being discussed could have U.S. forces phasing out of Iraq through 2011.

Negroponte, a former US ambassador to Iraq, and Zebari agreed that bold political decisions are needed to finalize the Status of Forces Agreement involving the nearly 146,000 U.S. troops still in Iraq.

Immunity for U.S. troops is the main sticking point. Negroponte refused to discuss details of the talks, saying only that "both countries are pursuing this issue from the point of
view of their own national self-interest."

Just before the news conference, a bomb exploded near the Foreign Ministry building, yards outside of the Green Zone. At least five people were wounded.

Judge Ricardo M. Urbina said there was no evidence the detainees, known as Uighurs, pose a security risk, and the Constitution prohibits indefinite detention without cause.

The Uighurs had been living in a camp in Afghanistan during the U.S.-led bombing campaign that began in October 2001. They fled into the mountains and were detained by Pakistani authorities, who handed them over to the United States.

The U.S. military no longer considers them "enemy combatants," but efforts by the Bush administration to find a country to take the detainees has been complicated by fears of diplomatic reprisals by China.

Bush administration lawyers argued Tuesday that Urbina did not have the authority to order the Uighurs released into the United States.

The judge has ordered them brought to his courtroom for a hearing on Friday. It was unclear how soon the prisoners might be released in the United States and whether their release would be delayed by Justice Department appeals.

Attorneys for the prisoners said Urbina's decision was the first time a federal court had ever ordered the release into the United States of any Guantanamo prisoners.

Uighurs are from Xinjiang -- an isolated region that borders Afghanistan, Pakistan and six Central Asian nations. China has long said that insurgents are leading an Islamic separatist movement in Xinjiang.

Bernanke said the Fed would need to consider whether its current stance of holding rates steady "remains appropriate" given the fallout from the worst financial crisis in decades.

"The outlook for economic growth has worsened," Bernanke said in prepared remarks to the annual meeting of the National Association for Business Economics.

Economic activity is likely to be slow during the remainder of this year and into 2009, he said.

If the Fed does lower its key rate from 2 percent it would mark an about-face. In June, the bank had halted an aggressive rate-cutting campaign to revive the economy out of fears of aggravating inflation.

Consumers, who account for the majority of economic activity, have buckled under the weight of rising joblessness, shrinking paychecks, hard-to-get credit, declining net wealth and tanking home and stock values.

All the strains are "now showing through more clearly to consumer spending," Bernanke said.

Federal regulators at the Office of Thrift Supervision warned in March that "corporate oversight of AIG Financial Products ... lack critical elements of independence."

At the same time, AIG's auditor, PricewaterhouseCoopers, confidentially warned the company that the "root cause" of its mounting problems was denying internal overseers access to the company's highly leveraged financial products branch.

Rep. Henry Waxman, who chairs the House Oversight and Government Committee, revealed the letter from the Office of Thrift Supervision and a warning by AIG accountants during a second day of hearings probing the causes of the financial crisis.

In September, AIG's financial problems led the Federal Reserve to lend up to $85 billion to the cash-strapped insurer over two years in exchange for a 79.9 percent equity stake.

Lawmakers expressed outrage at perks AIG executives enjoyed less than a week after the bailout, including a spa retreat where AIG racked up bills for $200,000 for hotel rooms and $23,000 for spa services.

"They were getting facials, manicures and massages, while the American people were footing the bill," said Rep. Elijah Cummings, a Maryland Democrat on the oversight panel.

In prepared testimony, former AIG Chief Executives Hank Greenberg and Robert Willumstad blamed short-sellers, fair value accounting standards and credit agencies' for the company's problems.

In its quarterly assessment of global capital markets, the IMF increased its estimate of U.S. bank losses from $945 billion in April and slightly up from $1.3 trillion it cited last month

"Declared losses on U.S. loans and securitized assets are likely to increase further to about $1.4 trillion," the IMF said.

The IMF said global economic activity is slowing down as growth in advanced economies decelerates and emerging economies start to lose momentum.

"Despite better-than-expected performance early this year, rising financial turmoil has led to a downgrade in the IMF's baseline forecast for global economic growth in 2008-09," it said.

The IMF called for "internationally coherent and decisive policy measures" to restore confidence and to avert a more protracted economic slowdown, but warned that central banks would need to continue injecting cash to calm the unprecedented turmoil.